Stingray Group Inc. — Interim / Quarterly Report 2021

Feb 3, 2021

~~Management’s discussion and analysis~~

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TABLE OF CONTENTS

Overview	3	Financial results for the periods ended
		December 31, 2020 and 2019	8
Key performance indicators	3
		Business segment performance	11
Financial and business highlights	3
		Liquidity for the periods
Selected consolidated financial information	6	ended December 31, 2020 and 2019	15
Supplemental information on
Non-IFRS measures	7

BASIS OF PREPARATION AND FORWARD-LOOKING STATEMENTS

The following is Management’s Discussion and Analysis (“MD&A”) of the results of operations and financial position of Stingray Group Inc., (“Stingray” or “the Corporation”), and should be read in conjunction with the Corporation’s unaudited interim consolidated financial statements and accompanying notes for the three-month and nine-month periods ended December 31, 2020 and 2019, and with the most recent audited consolidated financial statements and MD&A for the year ended March 31, 2020. This MD&A reflects information available to the Corporation as at February 3, 2021. Additional information relating to the Corporation is also available on SEDAR at www.sedar.com. The auditors of the Corporation have not performed a review of the interim financial report for the three-month and nine-month periods ended December 31, 2020 and 2019.

This MD&A contains forward-looking information within the meaning of applicable Canadian securities laws. This forward-looking information includes, but is not limited to, statements with respect to management’s expectations regarding the future growth, results of operations, performance and business prospects of the Corporation. This forward-looking information relates to, among other things, our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimations and intentions, and may also include other statements that are predictive in nature, or that depend upon or refer to future events or conditions. Statements with the words “could”, “expect”, “may”, “will”, “anticipate”, “assume”, “intend”, “plan”, “believes”, “estimates”, “guidance”, “foresee”, “continue” and similar expressions are intended to identify statements containing forward-looking information, although not all forward-looking statements included such words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events.

Although management believes the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based on the opinions, assumptions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include but are not limited to the risk factors disclosed in the Annual Information Form for the year ended March 31, 2020 available on SEDAR.

In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such assumptions include, but are not limited to, the following: our ability to generate sufficient revenue while controlling our costs and expenses; our ability to manage our growth effectively; the absence of material adverse changes in our industry or the global economy; trends in our industry and markets; the absence of any changes in law, administrative policy or regulatory requirements applicable to our business, including any change to our licences with the CRTC; minimal changes to the distribution of the pay audio services by Pay-TV providers in light of recent CRTC policy decisions; our ability to manage risks related to international expansion; our ability to maintain good business relationships with our clients, agents and partners; our ability to expand our sales and distribution infrastructure and our marketing; our ability to develop products and technologies that keep pace with the continuing changes in technology, evolving industry standards, new product introductions by competitors and changing client preferences and requirements; our ability to protect our technology and intellectual property rights; our ability to manage and integrate acquisitions; our ability to retain key personnel; and our ability to raise sufficient debt or equity financing to support our business growth. Accordingly, prospective purchasers are cautioned not to place undue reliance on such statements. All of the forward-looking information in this MD&A is qualified by these cautionary statements. Statements containing forward-looking information contained herein are made only as of the date of this MD&A. The Corporation expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumption underlying them, whether as a result of new information, future events or otherwise, except as required by law.

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

The Corporation believes that Adjusted EBITDA and Adjusted EBITDA margin are important measures when analyzing its operating profitability without being influenced by financing decisions, non-cash items and income taxes strategies. Comparison with peers is also easier as companies rarely have the same capital and financing structure. The Corporation believes that Adjusted Net income and Adjusted Net income per share are important measures as it shows stable results from its operation which allows users of the financial statements to better assess the trend in the profitability of the business. The Corporation believes that Adjusted free cash flow and Adjusted free cash flow per share are important measures when assessing the amount of cash generated after accounting for capital expenditures and non-core charges. It demonstrates cash available to make business acquisitions, pay dividend and reduce debt. The Corporation believes that Net debt and Net debt to Pro Forma Adjusted EBITDA are important to analyse the company's debt repayment capacity on an annualized basis, taking into consideration the annualized adjusted EBITDA of acquisitions made during the last twelve months. Each of these non-IFRS financial measures is not an earnings or cash flow measure recognized by International Financial Reporting Standards (IFRS) and does not have a standardized meaning prescribed by IFRS. Our method of calculating such financial measures may differ from the methods used by other issuers and, accordingly, our definition of these non-IFRS financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-IFRS financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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OVERVIEW

Montreal-based Stingray Group Inc. (TSX: RAY.A; RAY.B) is a leading music, media, and technology company with over 1,200 employees worldwide. Stingray is a premium provider of curated direct-to-consumer and B2B services, including audio television channels, more than 100 radio stations, SVOD content, 4K UHD television channels, karaoke products, digital signage, in-store music, and music apps, which have been downloaded over 150 million times. Stingray reaches 400 million subscribers (or users) in 156 countries.

KEY PERFORMANCE INDICATORS[(1)]

For the three-month period ended December 31, 2020 (“Q3 2021”):

$72.6 M $21.1 M $19.6 M ▼ 10.8% from Q3 2020 Or $0.29 per share ▼ 6.6% from Q3 2020 Revenues Adjusted Net income Adjusted free cash flow Or $0.27 per share $34.0 M $14.1 M $16.3 M ▲9.5% from Q3 2020 Or $0.19 per share ▼ 43.4% from Q3 2020 Adjusted EBITDA Net income Cash flow from operating activities Or $0.22 per share

FINANCIAL AND BUSINESS HIGHLIGHTS

Highlights of the third quarter ended December 31, 2020:

Compared to the quarter ended December 31, 2019 (“Q3 2020”):

• Revenues decreased 10.8% to $72.6 million from $81.3 million, primarily due to the impact of the COVID-19 pandemic on Radio revenues;

• Adjusted EBITDA[(1)] increased 9.5% to $34.0 million from $31.0 million. Adjusted EBITDA[(1)] by segment was $21.9 million or 54.5% of revenues for Broadcasting and Commercial Music, $13.8 million or 42.6% of revenues for Radio and $(1.7) million for Corporate;

• Net income was $14.1 million ($0.19 per share) compared with $8.1 million ($0.11 per share);

• Adjusted Net income[(1)] of $21.1 million ($0.29 per share) compared with $16.7 million ($0.22 per share);

• Cash flow from operating activities decreased 43.4% to $16.3 million ($0.22 per share) compared to $28.8 million ($0.38 per share) mainly due to the negative change in non-cash operating items;

• Adjusted free cash flow[(1)] decreased 6.6% to $19.6 million ($0.27 per share) compared to $21.0 million ($0.28 per share), and;

• Net debt to Pro Forma Adjusted EBITDA[(1)] ratio of 2.65x.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Business Highlights:

• During the first nine months of Fiscal 2021, global economies and financial markets were impacted by the coronavirus (“COVID-19”) outbreak as it quickly spread around the world and on March 11, 2020, the World Health Organization declared it a global pandemic. Government authorities around the world have taken actions to slowdown the spread of COVID-19, including measures such as the closure of non-essential businesses and social distancing. The tangible impact on the Corporation started in the Radio segment towards the end Q4 2020, as many non-essential local businesses were forced to temporarily close leading to a decrease in advertising and related revenues. In the early days of the crisis, the decision was made by the Corporation’s management to implement significant cost saving measures, which, combined with the Canadian Emergency Wage Subsidy (CEWS), helped to maintain a solid financial position. The Corporation’s Radio segment, and Broadcast and Commercial Music segment, but to a lesser extent, have been impacted during the first half of 2021. In Q3 2021, although still impacted, the Corporation noticed progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social distancing. Management expects the situation to continue improving as local businesses resume their normal operations. The extent to which COVID-19 continues to impact the Corporation’s business will depend on future developments, which are uncertain and cannot be predicted at this time. The Corporation’s focus will be to continue to closely monitor its cash position and control its operating expenses while capitalizing on its growth opportunities.

• On February 3, 2021, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend will be payable on or around March 15, 2021 to shareholders on record as of February 28, 2021.

• In December 2020, the Corporation, together with its Canadian Broadcast Distribution Undertaking customers (together, the “Objectors”), and SOCAN have entered into a binding memorandum of understanding that will result in a partial refund to the Objectors of past royalties paid to Canadian collective societies and a meaningfully reduced tariff burden for the present and future. As a result, $4.4 million was recognized as a reduction of expenses in Q3 2021. Refer to page 18 for more information.

• On December 28, 2020, the Corporation announced that it had concluded a deal to provide curated streaming music services for ClubCom, a division of Zoom Media, the leading provider of digital entertainment and marketing networks within the fitness industry. This new partnership seeks to provide exciting digital innovations to deliver an immersive experience for members of fitness centers across Canada and the United States.

• On December 21, 2020, the Corporation announced the sale of the securities it held in the capital stock of San Francisco based AppDirect Inc., a leading subscription based end-to-end cloud commerce platform for both monetizing and managing digital customer relationships. The sale in favour of existing shareholders and investors was completed pursuant to the terms and conditions of a stock transfer agreement and Stingray received cash consideration of US$14.6 million ($18.9 million) and recognized a loss on disposal of $2.4 million in change in fair value of investments in the consolidated statements of comprehensive income.

• On December 10, 2020, the Corporation announced that its Stingray Music TV app had launched on Helix TV, Videotron’s entertainment platform. Helix TV subscribers will have access to their favourite audio music channels like Stingray Hit List, Stingray Classic Rock or Stingray Hot Country through the brand new Stingray Music TV app.

• On November 25, the Corporation announced the launch of premium SVOD channels with new partner OneHub TV (UK) and existing partners Optimum and Suddenlink by Altice (US), Amazon Prime Video Channels (Italy and Spain), Player + (Poland), Rogers Communications (Canada), Swisscom blue TV (Switzerland) and Totalplay (Mexico). SVOD channels Qello Concerts by Stingray, Stingray Karaoke, and Stingray Classica are offered to customers for a monthly subscription.

• On November 25, the Corporation announced the launch of free, ad-supported TV channels with eleven major OTT providers: Comcast Xfinity (US), DistroTV (US), Freebie TV (US), Freecast (US), MX Player (US and India), Peacock (US), Redbox (US), Samsung TV Plus (UK and Germany), STIRR (US), STV (UK) and Vizio Watch Free (US). These distribution agreements grow Stingray’s potential reach by over 200 million viewers.

• On November 4, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend was paid on December 15, 2020 to shareholders on record as of November 30, 2020.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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• On November 4, 2020, the Corporation announced that it had reached a long-term agreement with TELUS that continues to advance the companies’ long-standing partnership. As part of the deal, Optik TV subscribers will have access to the new TV app Qello Concerts by Stingray, enabling them to experience full-length concerts and music documentaries from the comfort of home.

• On October 9, 2020, the Corporation announced that it had successfully completed the increase and extension of its existing credit facilities, providing additional liquidity for operations and M&A activities with improved terms and conditions. The $420.0 million credit facilities consist of a $325.0 million revolving credit facility and a $75.0 million term loan, both maturing in October 2023, and the pre-existing $20.0 million term loan, maturing in May 2021. The renewed terms add incremental commitments up to $100.0 million upon request, subject to predetermined conditions. The preexisting sub debt of $40.0 million maturing in October 2023 combined with the new credit facilities described above accounts for total flexibility of up to $560.0 million.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

(in thousands of Canadian dollars, except per share amounts)	3 months Dec. 31, 2020 Q3 2021 Dec. 31, 2019 Q3 2020	9 months
		Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020
	$ % of revenues $ % of revenues	$ % of revenues $ % of revenues
Revenues Operating expenses Depreciation, amortization and write-off Net finance expense (income)(1) Change in fair value of investments Acquisition, legal, restructuring and other expenses	72,565 100.0 % 81,313 100.0 % 40,583 55.9 % 51,195 63.0 % 9,771 13.5 % 9,772 12.0 % (1,290) (1.8) % (4,383) (5.4) % 2,434 3.4 % (4,781) (5.9) % 2,049 2.8 % 19,524 24.0 %	189,152 100.0 % 238,323 100.0 % 103,546 54.7 % 151,449 63.5 % 28,871 15.3 % 30,427 12.8 % 6,085 3.2 % 9,359 3.9 % 3,787 2.0 % (4,636) (1.9) % 1,923 1.0 % 23,411 9.8 %
Income before income taxes Income taxes	19,018 26.2 % 9,986 12.3 % 4,900 6.8 % 1,897 2.4 %	44,940 23.8 % 28,313 11.9 % 11,913 6.3 % 5,857 2.5 %
Net income	14,118 19.4 % 8,089 9.9 %	33,027 17.5 % 22,456 9.4 %
Adjusted EBITDA(2) Adjusted Net income(2) Cash flow from operating activities Adjusted free cash flow(2) Net debt(2) Net debt to Pro Forma Adjusted EBITDA(2)(3) Net income per share basic and diluted Adjusted Net income per share basic and diluted(2) Cash flow from operating activities per share basic and diluted Adjusted free cashflow per share basic and diluted(2) Revenues by segment Broadcasting and Commercial Music Radio	33,993 46.8 % 31,033 38.2 % 21,054 29.0 % 16,710 20.6 % 16,333 22.5 % 28,833 35.5 % 19,645 27.1 % 21,033 25.9 % 320,241 – 346,460 – 2.65x – 2.94x – 0.19 – 0.11 – 0.29 – 0.22 – 0.22 – 0.38 – 0.27 – 0.28 – 40,186 55.4 % 39,894 49.1 % 32,379 44.6 % 41,419 50.9 %	90,630 47.9 % 89,869 37.7 % 50,874 26.9 % 45,813 19.2 % 79,732 42.2 % 74,083 31.1 % 60,551 32.0 % 60,376 25.3 % 320,241 – 346,460 – 2.65x – 2.94x – 0.45 – 0.29 – 0.69 – 0.60 – 1.08 – 0.97 – 0.82 – 0.79 – 115,302 61.0 % 115,983 48.7 % 73,850 39.0 % 122,340 51.3 %
Revenues	72,565 100.0 % 81,313 100.0 %	189,152 100.0 % 238,323 100.0 %
Revenues by geography Canada United States Other Countries	47,368 65.3 % 57,515 70.7 % 10,693 14.7 % 9,575 11.8 % 14,504 20.0 % 14,223 17.5 %	115,135 60.9 % 166,345 69,8 % 31,086 16.4 % 27,751 11.6 % 42,931 22.7 % 44,227 18.6 %
Revenues	72,565 100.0 % 81,313 100.0 %	189,152 100.0 % 238,323 100.0 %

Notes:

• (1) Interest paid during the Q3 2021 was $6.3 million (Q3 2020; $4.2 million). Interest paid for YTD Q3 2021 was $12.9 million (YTD Q3 2020; $13.6 million). (2) Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 2 and for reconciliations to the most directly comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures” on page 7.

• (3) Refer to page 17 for a reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable IFRS financial measure. Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 2 and for reconciliations of Adjusted EBITDA to the most directly comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures” on page 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Net income per share, Adjusted free cash flow, Adjusted free cash flow per share, Net debt and Net debt to Proforma Adjusted EBITDA are non-IFRS measures that the Corporation uses to assess its operating performance. See “Supplemental information on Non-IFRS Measures” on page 2.

The following tables show the reconciliation of Net income to Adjusted EBITDA and to Adjusted Net income: 3 months 9 months (in thousands of Canadian dollars) Dec. 31, 2020 Q3 2021 Dec. 31, 2019 Q3 2020 Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020	The following tables show the reconciliation of Net income to Adjusted EBITDA and to Adjusted Net income: 3 months 9 months (in thousands of Canadian dollars) Dec. 31, 2020 Q3 2021 Dec. 31, 2019 Q3 2020 Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020	The following tables show the reconciliation of Net income to Adjusted EBITDA and to Adjusted Net income: 3 months 9 months (in thousands of Canadian dollars) Dec. 31, 2020 Q3 2021 Dec. 31, 2019 Q3 2020 Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020
		Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020
Net income Net finance expense (income) Change in fair value of investments Income taxes Depreciation and write-off of property and equipment Depreciation of right-of-use assets Amortization of intangible assets Share-based compensation Performance and deferred share unit expense Acquisition,legal,restructuringand other expenses	14,118 8,089 (1,290) (4,383) 2,434 (4,781) 4,900 1,897 2,894 2,876 1,399 1,402 5,478 5,494 231 238 1,780 677 2,049 19,524	33,027 22,456 6,085 9,359 3,787 (4,636) 11,913 5,857 8,571 8,687 4,224 4,192 16,076 17,548 616 743 4,408 2,252 1,923 23,411
Adjusted EBITDA	33,993 31,033	90,630 89,869
Net finance expense (income), excluding mark-to-market losses (gains) on derivative financial instruments Income taxes Depreciation of property and equipment and write-off Depreciation of right-of-use assets Income taxes related to change in fair value of investments, share-based compensation, performance and deferred share unit expense, amortization of intangible assets, mark-to-market losses (gains) on derivative financial instruments and acquisition, legal, restructuring and other expenses	(1,727) (4,184) (4,900) (1,897) (2,894) (2,876) (1,399) (1,402) (2,019) (3,964)	(9,405) (16,146) (11,913) (5,857) (8,571) (8,687) (4,224) (4,192) (5,643) (9,174)
Adjusted Net income	21,054 16,710	50,874 45,813

The following table shows the reconciliation of Cash flow from operating activities to Adjusted free cash flow:

(in thousands of Canadian dollars)	3 months Dec. 31, 2020 Q3 2021 Dec. 31, 2019 Q3 2020	9 months
		Dec. 31, 2020 YTD 2021 Dec. 31, 2019 YTD 2020
Cash flow from operating activities Add / Less : Acquisition of property and equipment Acquisition of intangible assets other than internally developed intangible assets Addition to internally developed intangible assets Interest paid Repayment of lease liabilities Net change in non-cash operating working capital items Unrealized loss on foreign exchange Acquisition,legal,restructuringand other expenses	16,333 28,833 (1,849) (1,479) (649) (495) (1,838) (1,286) (6,312) (4,150) (1,255) (1,295) 15,858 (17,702) (2,692) (917) 2,049 19,524	79,732 74,083 (3,761) (4,551) (1,119) (1,306) (5,061) (4,368) (12,911) (13,623) (3,912) (3,693) 10,976 (9,432) (5,316) (145) 1,923 23,411
Adjusted free cash flow	19,645 21,033	60,551 60,376

The following table shows the calculation of Net debt:

	December 31,	March 31,	December 31,
(in thousands of Canadian dollars)	2020	2020	2019
Credit facilities	290,353	324,123	314,161
Subordinated debt	39,715	39,640	39,614
Cash and cash equivalents	(9,827)	(2,512)	(7,315)
Net debt	320,241	361,251	346,460

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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FINANCIAL RESULTS FOR THE PERIODS ENDED DECEMBER 31, 2020 AND 2019

CONSOLIDATED PERFORMANCE

Revenues

Revenues are detailed as follows:

(in thousands of Canadian dollars)	3 months Q3 2021 Q3 2020 % Change	9 months
		YTD 2021 YTD 2020 % Change
Revenues by geography Canada United States Other Countries	47,368 57,515 (17.6) 10,693 9,575 11.7 14,504 14,223 2.2	115,135 166,345 (30.8) 31,086 27,751 12.0 42,931 44,227 (2.9)
Revenues	72,565 81,313 (10.8)	189,152 238,323 (20.6)

Global

Revenues in Q3 2021 decreased $8.7 million or 10.8% to $72.6 million, from $81.3 million for Q3 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues, as well as a decrease in equipment and installation sales related to digital signage, partially offset by the acquisition of Marketing Sensorial México (MSM) and Chatter Research Inc. and by the increase in advertising revenues in the Broadcast and Commercial Music segment.

Cumulative revenues for Fiscal 2021 decreased $49.1 million or 20.6% to $189.2 million, from $238.3 million for cumulative Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage, partially offset by the acquisition of Marketing Sensorial México (MSM) and Chatter Research Inc., the increase in advertising revenues in the Broadcast and Commercial Music segment and the organic growth in streaming subscriptions.

Canada

Revenues in Canada in Q3 2021 decreased $10.1 million or 17.6% to $47.4 million, from $57.5 million for Q3 2020. Cumulative revenues in Canada for Fiscal 2021 decreased $51.2 million or 30.8% to $115.1 million, from $166.3 million for cumulative Fiscal 2020. Both decreases were primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage.

United States

Revenues in the United States in Q3 2021 increased $1.1 million or 11.7% to $10.7 million, from $9.6 million for Q3 2020. The increase was primarily due to organic growth in advertising revenues in the Broadcast and Commercial Music segment and in streaming subscriptions.

Cumulative revenues in the United States for Fiscal 2021 increased $3.3 million or 12.0% to $31.1 million, from $27.8 million for cumulative Fiscal 2020. The increase was primarily due to organic growth in streaming subscriptions and in advertising revenues in the Broadcast and Commercial Music segment.

Other Countries

Revenues in Other countries in Q3 2021 increased $0.3 million or 2.0% to $14.5 million, from $14.2 million for Q3 2020. The increase was primarily due to the acquisition of MSM, partially offset by the impact of the COVID-19 pandemic on revenues.

Cumulative revenues in Other countries for Fiscal 2021 decreased $1.2 million or 2.9% to $43.0 million, from $44.2 million for cumulative Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, partially offset by the acquisition of MSM.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Operating Expenses

Operating expenses in Q3 2021 decreased $10.6 million or 20.7% to $40.6 million, from $51.2 million for Q3 2020. The decrease was primarily related to reduced operating costs, to a settlement with SOCAN (refer to page 18), to reduced variable expenses due to the impact of the COVID-19 pandemic on revenues and to the CEWS and other subsidies ($3.1 million), partially offset by a special bonus to employees.

Cumulative operating expenses for Fiscal 2021 decreased $47.9 million or 31.6% to $103.5 million, from $151.4 million for cumulative Fiscal 2020. The decrease was primarily related to the CEWS and other subsidies ($21.1 million), to reduced operating costs, to reduced variable expenses due to the impact of the COVID-19 pandemic on revenues and to a settlement with SOCAN (refer to page 18), partially offset by a special bonus to employees and increased expense for performance and deferred share unit.

Adjusted EBITDA[(1)]

Adjusted EBITDA in Q3 2021 increased $3.0 million or 9.5% to $34.0 million from $31.0 million for Q3 2020. Adjusted EBITDA margin was 46.8% compared to 38.2% for Q3 2020. The increase in Adjusted EBITDA was primarily due to reduced operating costs, to a settlement with SOCAN (refer to page 18), to the CEWS and other subsidies and to an increase in gross margin related to a change in product mix, partially offset by the impact of the COVID-19 pandemic on revenues and by a special bonus to employees.

Cumulative Adjusted EBITDA for Fiscal 2021 increased $0.7 million or 0.8% to $90.6 million from $89.9 million for cumulative Fiscal 2020. Adjusted EBITDA margin was 47.9% compared to 37.7% for cumulative Fiscal 2020. The increase in Adjusted EBITDA was primarily due to the CEWS and other subsidies, to reduced operating costs and to a settlement with SOCAN (refer to page 18), partially offset by the impact of the COVID-19 pandemic on revenues and by a special bonus to employees.

Depreciation, amortization and write off

Depreciation, amortization and write off in Q3 2021 remained stable at $9.8 million. Cumulative depreciation, amortization and write off for Fiscal 2021 decreased $1.5 million or 5.1% to $28.9 million, from $30.4 million for cumulative Fiscal 2020. The decrease was primarily due to less intangible assets to amortize compared to the prior period.

Net finance expense (income)

Net finance income in Q3 2021 decreased $3.1 million or 70.6% to $1.3 million, from $4.4 million for Q3 2020. The decrease was mainly related to lower mark-to-market gain on derivative instruments and higher interest expense, partially offset by positive change in fair value of contingent considerations and foreign exchange gain.

Cumulative Net finance expense for Fiscal 2021 decreased $3.3 million or 35.0% to $6.1 million, from $9.4 million for cumulative Fiscal 2020. The decrease was mainly related to a foreign exchange gain and positive change in fair value of contingent considerations, partially offset by a lower mark-to-market gain on derivative instruments.

Change in fair value of investments

In Q3 2021, a loss on fair value of $2.4 million was recorded compared to a gain of $4.8 million for Q3 2020. For cumulative Fiscal 2021, a loss on fair value of $3.8 million was recorded compared to a gain of $4.6 million for cumulative Fiscal 2020. The variance is related to the sale of securities held in AppDirect Inc. during Q3 2021 which had a lower proceed than the estimated fair value before the transaction occurred. Refer to page 4 for more information.

Acquisition, legal, restructuring and other expenses

(in thousands of Canadian dollars)	3 months Q3 2021 Q3 2020 % Change	9 months
		YTD 2021 YTD 2020 % Change
Acquisition Legal Restructuringand other	802 924 (13.2) 735 18,469 (96.0) 512 131 290.8	1,332 1,390 (4.2) 199 21,495 (99.1) 392 526 (25.5)
Acquisition, legal, restructuring and other expenses	2,049 19,524 (89.5)	1,923 23,411 (91.8)

In Q3 2020 and in cumulative Fiscal 2020, legal expenses were higher due to a patent litigation with Music Choice, which was settled in Q4 2020.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Income Taxes

The income taxes expense recognized in comprehensive income was $4.9 million for Q3 2021 compared to $1.9 million for Q3 2020. The effective tax rate for Q3 2021 was 25.8% compared to 19.0% for Q3 2020. The variance in the effective tax rate is mainly due to the relative importance of permanent differences compared to Net income before income taxes.

The income taxes expense recognized in comprehensive income was $11.9 million for cumulative Fiscal 2021 compared to $5.9 million for cumulative Fiscal 2020. The effective tax rate for cumulative Fiscal 2021 was 26.5% compared to 20.7% for cumulative Fiscal 2020. The variance in the effective tax rate is mainly due to the decrease in the Alberta corporate income tax rate enacted in Q1 2020, which reduced deferred tax liabilities.

Net income and net income per share

Net income in Q3 2021 was $14.1 million ($0.19 per share) compared to $8.1 million ($0.11 per share) for Q3 2020. The increase was mainly related to lower legal expenses, higher operating results, positive change in fair value of contingent considerations and foreign exchange gain, partially offset by the negative change in fair value of investments following the sale of securities held in AppDirect Inc., the lower mark-to-market gain on derivative instruments and the higher income taxes and performance and deferred share unit expense.

Cumulative Net income for Fiscal 2021 was $33.0 million ($0.45 per share) compared to $22.5 million ($0.29 per share) for cumulative Fiscal 2020. The increase was mainly related to the lower legal expenses and the foreign exchange gain, partially offset by the negative change in fair value of investments following the sale of securities held in AppDirect Inc., the higher income taxes expense and the lower mark-to-market gain on derivative instruments.

Adjusted Net income[(1)] and Adjusted Net income per share[(1)]

Adjusted Net income in Q3 2021 was $21.1 million ($0.29 per share), compared to $16.7 million ($0.22 per share) for Q3 2020. The increase was mainly related to higher operating results, positive change in fair value of contingent considerations and foreign exchange gain, partially offset by higher interest expense and income taxes.

Cumulative Adjusted Net income for Fiscal 2021 was $50.9 million ($0.69 per share), compared to $45.8 million ($0.60 per share) for cumulative Fiscal 2020. The increase is mainly due to the foreign exchange gain and the positive change in fair value of contingent considerations, partially offset by higher income taxes expense.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

10

BUSINESS SEGMENT PERFORMANCE

BROADCASTING AND COMMERCIAL MUSIC

(in thousands of Canadian dollars)	3 months Q3 2021 Q3 2020 % Change	9 months
		YTD 2021 YTD 2020 % Change
Revenues Operatingexpenses	40,186 39,894 0.7 18,293 25,015 (26.9)	115,302 115,983 (0.6) 54,146 71,264 (24.0)
Adjusted EBITDA(1)	21,893 14,879 47.1	61,156 44,719 36.8
Adjusted EBITDA margin(1)	54.5% 37.3% 46.1	53.0% 38.6% 37.6

Revenues

In Q3 2021, Broadcasting and Commercial Music revenues increased $0.3 million or 0.7% to $40.2 million, from $39.9 million for Q3 2020. The increase was primarily due to the acquisition of MSM and Chatter Research Inc. and to the increase in advertising revenues, partially offset by a decrease in equipment and installation sales related to digital signage and by the impact of the COVID-19 pandemic on revenues.

Cumulative Broadcasting and Commercial Music revenues for Fiscal 2021 decreased $0.7 million or 0.6% to $115.3 million from $116.0 million for cumulative Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues and to a decrease in equipment and installation sales related to digital signage, partially offset by the acquisition of MSM and Chatter Research Inc., the increase in advertising revenues and the organic growth in streaming subscriptions.

Adjusted EBITDA[(1)]

In Q3 2021, Broadcasting and Commercial Music Adjusted EBITDA increased $7.0 million or 47.1% to $21.9 million from $14.9 million for Q3 2020. The increase was primarily due to a settlement with SOCAN (refer to page 18) and to reduced operating costs, partially offset by a special bonus to employees.

Cumulative Broadcasting and Commercial Music Adjusted EBITDA for Fiscal 2021 increased $16.5 million or 36.8% to $61.2 million from $44.7 million for cumulative Fiscal 2020. The increase was primarily due to the CEWS and other subsidies, to reduced operating costs and to a settlement with SOCAN (refer to page 18), partially offset by a special bonus to employees and by the impact of the COVID-19 pandemic on revenues.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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RADIO

RADIO
(in thousands of Canadian dollars)	3 months Q3 2021 Q3 2020 % Change	9 months
		YTD 2021 YTD 2020 % Change
Revenues Operatingexpenses	32,379 41,419 (21.8) 18,598 24,023 (22.6)	73,850 122,340 (39.6) 41,188 73,402 (43.9)
Adjusted EBITDA(1)	13,781 17,396 (20.8)	32,662 48,938 (33.3)
Adjusted EBITDA margin(1)	42.6% 42.0% 1.3	44.2% 40.0% 10.6

Revenues

Radio revenues are derived from the sale of advertising airtime, which is subject to the seasonal fluctuations of the Canadian radio industry. Accordingly, the first and third quarter results tend to be the strongest and the second and fourth quarter results tend to be the weakest in a fiscal year. However, for Fiscal 2021 Radio revenues are not expected to follow historical patterns due to the ongoing impact of the COVID-19 pandemic.

In Q3 2021, Radio revenues decreased $9.0 million or 21.8% to $32.4 million from $41.4 million for Q3 2020. Cumulative Radio revenues for Fiscal 2021 decreased $48.4 million or 39.6% to $73.9 million from $122.3 million for cumulative Fiscal 2020. Both decreases were primarily due to the impact of the COVID-19 pandemic on revenues.

Adjusted EBITDA[(1)]

In Q3 2021, Radio Adjusted EBITDA decreased $3.6 million or 20.8% to $13.8 million from $17.4 million for Q3 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, partially offset by reduced operating costs and by the CEWS and other subsidies.

Cumulative Radio Adjusted EBITDA for Fiscal 2021 decreased $16.2 million or 33.3% to $32.7 million from $48.9 million for cumulative Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, partially offset by the CEWS and other subsidies and by reduced operating costs.

CORPORATE

(in thousands of Canadian dollars)	3 months Q3 2021 Q3 2020 % Change	9 months
		YTD 2021 YTD 2020 % Change
Operating expenses Adjust: Share-based compensation Performance and deferred share unit expense	3,692 2,157 71.2 (231) (238) (2.9) (1,780) (677) 162.9	8,212 6,783 21.1 (616) (743) (17.1) (4,408) (2,252) 95.7
Adjusted EBITDA(1)	(1,681) (1,242) 35.3	(3,188) (3,788) (15.8)

Adjusted EBITDA[(1)]

Corporate Adjusted EBITDA represented the head office operating expenses less the share-based compensation and performance and deferred share unit expense. The increase in operating expenses is related to a special bonus to employees. The increase in Performance and deferred share unit expense is due to the increase in the share price and to additional grants.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Quarterly results

Revenues fluctuated over the last eight quarters from $72.7 million in Q4 2019 to $72.6 million in the Q3 2021. The increase in Q1 2020, decrease in Q2 2020 and increase in Q3 2020 are mainly due to normal business seasonality in the Radio segment. The decrease in Q4 2020 and Q1 2021 were due to the impact of the COVID-19 pandemic. The increases in Q2 2021 and Q3 2021 are due to progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social and economic activity and to normal business seasonality.

Adjusted EBITDA[(1)] increased over the last eight quarters from $22.4 million in Q4 2019 to $34.0 million in Q3 2021. The increase was mainly attributable to the successful integration of acquisitions and organic growth including new contracts. The increase in Q1 2020, decrease in Q2 2020 and increase in Q3 2020 were mainly due to normal business seasonality in the Radio segment. The decrease in Q4 2020 and Q1 2021 were mainly due to the impact of the COVID-19 pandemic on Radio revenues, which was partially offset by the CEWS and reduced operating costs in Q1 2021. The increase in Q2 2021 is due to progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social and economic activity, partially offset by higher operating costs and lower CEWS. The increase in Q3 2021 is due to continuing improvements in Radio advertising bookings and normal business seasonality and to a settlement with SOCAN (refer to page 18), partially offset by a special bonus to employees, lower CEWS and higher operating costs.

Net income (loss) fluctuated over the last eight quarters from $3.9 million in Q4 2019 to $14.1 million in Q3 2021. In Q1 2020, the increase was due to higher operating results, lower acquisition expenses and lower mark-to-market losses on derivative financial instruments, partially offset by the absence of write-off of balance payable on acquisition and positive change in fair value of contingent considerations. In Q2 2020, the decrease was due to lower operating results, higher income taxes and acquisition, legal, restructuring and other expenses, partially offset by lower mark-to-market losses on derivative financial instruments, positive change in fair value of contingent considerations and lower interest expense. In Q3 2020, the increase was due to mark-to-market gains on derivative financial instruments, positive change in fair value of investments, higher operating results and gain in foreign exchange, partially offset by higher legal expenses due to the settlement with Music Choice. In Q4 2020, the decrease was due to by mark-to-market losses on derivative financial instruments, foreign exchange loss, lower positive change in fair value of investments and lower operating results, partially offset by lower income taxes expense. In Q1 2021, the increase was due to lower mark-to-market losses on derivative financial instruments and a foreign exchange gain, partially offset by the impact of the COVID-19 pandemic on revenues, higher income taxes expense and negative change in fair value of investments. In Q2 2021, the increase was due to higher operating results and positive change in mark-to-market on derivative financial instruments, partially offset by higher income taxes and legal expenses. In Q3 2021, the increase was due to higher operating results, positive change in fair value of contingent considerations, and higher gain in mark-to-market on derivative financial instruments, partially offset by a negative change in fair value of investments related to the sale of securities held in AppDirect Inc.

Summary of Consolidated Quarterly Results

(in thousands of Canadian dollars, exceptper share amounts)	3 months
	Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019 June 30, 2019 March 31, 2019
	FY2021 FY2021 FY2021 FY2020 FY2020 FY2020 FY2020 FY2019
Revenues by segment Broadcasting and Commercial Music Radio	40,186 39,169 35,947 38,483 39,894 38,742 37,347 38,718 32,379 25,125 16,346 29,915 41,419 37,831 43,090 34,012
Total revenues Revenues by geography Canada United States Other countries	72,565 64,294 52,293 68,398 81,313 76,573 80,437 72,730 47,368 39,710 28,057 43,498 57,515 52,723 56,107 47,318 10,693 10,091 10,302 10,236 9,575 9,035 9,141 9,351 14,504 14,493 13,934 14,664 14,223 14,815 15,189 16,061
Total revenues Adjusted EBITDA(1) LTM Adjusted EBITDA(1) Net income (loss) Net income (loss) per share basic and diluted Adjusted Net income(1) Adjusted Net income per share basic and diluted(1) Cash flow from operations Adjusted free Cash Flow(1)	72,565 64,294 52,293 68,398 81,313 76,573 80,437 72,730 33,993 31,156 25,481 28,217 31,033 27,671 31,165 22,407 118,847 115,887 112,402 118,086 112,276 108,462 92,220 72,234 14,118 11,888 7,021 (8,486) 8,089 5,184 9,183 3,942 0.19 0.16 0.10 (0.11) 0.11 0.07 0.12 0.06 21,054 16,311 13,509 10,095 16,710 12,416 16,687 14,725 0.29 0.22 0.18 0.13 0.22 0.16 0.22 0.21 16,333 25,406 37,993 14,062 28,833 18,952 26,298 18,072 19,645 22,861 18,045 17,974 21,033 18,756 20,587 9,845
Quarterly dividend	0.075 0.075 0.075 0.075 0.075 0.070 0.070 0.065

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7. Last twelve months (LTM) Adjusted EBITDA represents the Adjusted EBITDA of the referenced period, plus the Adjusted EBITDA of the three quarters immediately preceding the referenced period.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Reconciliation of Quarterly Non-IFRS Measures

(in thousands of Canadian dollars)	3 months
	Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019 June 30, 2019 March 31, 2019
	Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2019
Net income (loss) Net finance expense (income) Change in fair value of investments Income taxes Depreciation and write-off of property and equipment Depreciation of right-of-use assets Amortization of intangible assets Share-based compensation Performance and deferred share unit expense Acquisition, legal, restructuring and other expenses(income)	14,118 11,888 7,021 (8,486) 8,089 5,184 9,183 3,942 (1,290) 2,774 4,601 33,463 (4,383) 6,362 7,380 2,259 2,434 461 892 (1,914) (4,781) (188) 333 336 4,900 4,654 2,359 (4,165) 1,897 2,479 1,481 1,833 2,894 2,976 2,701 2,790 2,876 2,989 2,822 2,791 1,399 1,413 1,412 1,426 1,402 1,419 1,371 - 5,478 5,188 5,410 5,659 5,494 5,935 6,119 7,187 231 219 166 258 238 257 248 297 1,780 1,312 1,316 (1,507) 677 794 781 630 2,049 271 (397) 693 19,524 2,440 1,447 3,132
Adjusted EBITDA	33,993 31,156 25,481 28,217 31,033 27,671 31,165 22,407
Net finance expense (income), excluding mark-to-market losses (gains) on derivative financial instruments Income taxes Depreciation and write-off of property and equipment Depreciation of right-of-use assets Income taxes related to change in fair value of investments, share- based compensation, performance and deferred share unit expense, amortization of intangible assets, mark-to- market losses (gains) on derivative financial instruments and acquisition, legal, restructuring and other expenses(income)	(1,727) (4,340) (3,338) (10,976) (4,184) (5,767) (6,195) 739 (4,900) (4,654) (2,359) 4,165 (1,897) (2,479) (1,481) (1,833) (2,894) (2,976) (2,701) (2,790) (2,876) (2,989) (2,822) (2,791) (1,399) (1,413) (1,412) (1,426) (1,402) (1,419) (1,371) - (2,019) (1,462) (2,162) (7,095) (3,964) (2,601) (2,609) (3,797)
Adjusted Net income	21,054 16,311 13,509 10,095 16,710 12,416 16,687 14,725
(in thousands of Canadian dollars)	3 months
	Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019 June 30, 2019 March 31, 2019
	Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2019
Cash flow from operating activities Acquisition of property and equipment Acquisition of intangible assets other than internally developed intangible assets Addition to internally developed intangible assets Interest paid Repayment of lease liabilities Net change in non-cash operating working capital items Unrealized loss (gain) on foreign exchange Acquisition, legal, restructuring and other expenses(income)	16,333 25,406 37,993 14,062 28,833 18,952 26,298 18,072 (1,849) (1,209) (703) (2,153) (1,479) (1,459) (1,613) (1,935) (649) (212) (258) (463) (495) (292) (519) (669) (1,838) (1,671) (1,552) (1,534) (1,286) (1,559) (1,523) (1,742) (6,312) (2,912) (3,687) (3,819) (4,150) (4,493) (4,980) (4,441) (1,255) (1,443) (1,214) (1,180) (1,295) (1,303) (1,095) - 15,858 6,530 (11,412) 7,262 (17,702) 6,143 2,127 (1,890) (2,692) (1,899) (725) 5,106 (917) 327 445 (682) 2,049 271 (397) 693 19,524 2,440 1,447 3,132
Adjusted free cash flow	19,645 22,861 18,045 17,974 21,033 18,756 20,587 9,845

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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LIQUIDITY

FOR THE PERIODS ENDED DECEMBER 31, 2020 AND 2019

(in thousands of Canadian dollars)	3 months 9 months
	Q3 2021 Q3 2020 YTD 2021 YTD 2020
Operating activities Financing activities Investingactivities	16,333 28,833 79,732 74,083 (31,937) (26,642) (81,337) (60,066) 14,525 (3,260) 8,920 (11,375)
Net change in cash Cash – beginningofperiod	(1,079) (1,069) 7,315 2,642 10,906 8,384 2,512 4,673
Cash – end ofperiod	9,827 7,315 9,827 7,315
Adjusted free cash flow(1)	19,645 21,033 60,551 60,376

Operating activities

Cash flow generated from operating activities amounted to $16.3 million for Q3 2021 compared to $28.8 million for Q3 2020. The decrease was mainly due to the negative change in non-cash operating items, partially offset by lower legal expenses and higher operating results.

Cash flow generated from operating activities amounted to $79.7 million for cumulative Fiscal 2021 compared to $74.1 million for cumulative Fiscal 2020. The increase was mainly due to lower legal expenses and higher foreign exchange gain, partially offset by a negative change in non-cash operating items and higher income taxes paid.

Financing Activities

Net cash flow used in financing activities amounted to $31.9 million for Q3 2021 compared to $26.6 million for Q3 2020. The increase was mainly related to the repayment of the balance payable for the acquisition of MSM and higher interest paid, partially offset by less shares repurchased.

Net cash flow used in financing activities amounted to $81.3 million for cumulative Fiscal 2021 compared to $60.1 million for cumulative Fiscal 2020. The increase was mainly due to higher repayment of the credit facilities, partially offset by less shares repurchased.

Investing Activities

Net cash flow generated by investing activities amounted to $14.5 million for Q3 2021 compared to net cash flow used in investing activities of $3.3 million for Q3 2020. The positive net change was primarily due to the $18.9 million proceeds from the sale of securities held in AppDirect Inc. during Q3 2021.

Net cash flow generated by investing activities amounted to $8.9 million for cumulative Fiscal 2021 compared to net cash flow used in investing activities of $11.4 million for cumulative Fiscal 2020. The positive net change was primarily due to the $18.9 million proceeds from the sale of securities held in AppDirect Inc. during Q3 2021 and to lower business and assets acquisitions.

Adjusted free cash flow[(1)]

Adjusted free cash flow generated in Q3 2021 amounted to $19.6 million compared to $21.0 million for Q3 2020. The decrease was mainly related to higher interest paid, income taxes paid and capital expenditures, partially offset by higher operating results.

Adjusted free cash flow generated in cumulative Fiscal 2021 amounted to $60.6 million compared to $60.4 million for cumulative Fiscal 2020. The increase was mainly related to higher operating results and lower interest paid, partially offset by higher income taxes paid.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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CONSOLIDATED FINANCIAL POSITION AND CAPITAL RESOURCES

The following table shows the main variances that have occurred in the consolidated financial position of the Corporation for the nine-month period ending December 31, 2020:

	Dec. 31,	March 31,
(in thousands of Canadian dollars)	2020	2020	Variance		Significant contributions
					Timing of payments by clients and
					decrease in revenues due to the
Trade and other receivables	70,485	73,456	(2,971)	▼	COVID-19 pandemic, partially offset by the receivable from the
					settlement with SOCAN (refer to
					page18)
					Amortization of intangible assets,
					offset by additions through
Intangible assets	47,837	54,490	(6,653)	▼	business acquisition and internally
					developed intangible assets
					additions
					Acquisition of Marketing Sensorial
Goodwill	341,050	337,824	3,226	▲	Mexico, partially offset by foreign
					exchange differences
Accounts payables and accrued liabilities	57,804	62,101	(4,297)	▼	Timing of payments to suppliers and decrease in operating
					expenses
					Repayment of contingent
					consideration from past business
					acquisitions, gain on change in fair
					value of contingent consideration
Other liabilities	72,790	81,281	(8,491)	▼	and decrease in negative mark-to-
					market on derivative financial
					instruments, partially offset by the
					contingent consideration for the
					acquisitionof MSM
Creditfacilities	290,353	324,123	(33,770)	▼	Referto the graphon next page
Subordinated debt	39,715	39,640	75	▲	Amortization of deferred financing fees

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Capital Resources

Our principal sources of liquidity are our net cash provided by operating activities and borrowings available under our revolving facility. Our principal uses of cash are to repay our debt, finance our acquisitions and capital expenditures, pay dividends, repurchase shares and provide for working capital. We expect that cash generated from operations and borrowings available under our current credit facilities will be sufficient to meet our liquidity needs in the foreseeable future.

On October 6, 2020, the Corporation amended its existing $373.8 million credit facilities by increasing the authorized amount up to $420.0 million. The credit facilities consist of a $325.0 revolving credit facility and a $75.0 term loan, both maturing in October 2023, and includes the pre-existing $20.0 term loan, secured on May 29, 2020 and maturing in May 2021.

The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial drawdown of the $75.0 term loan. The remaining capital balance will be payable on maturity date, on October 25, 2023.

The credit facilities bear interest at either (a) the bank’s prime rate plus an applicable margin based on a financial covenant or (b) the banker’s acceptance rate plus an applicable margin based on a financial covenant. In addition, the Corporation incurs standby fees, varying between 0.40% and 0.63% based on a financial covenant.

As of December 31, 2020, the Corporation had cash and cash equivalents of $9.8 million, a subordinated debt of $39.7 million and credit facilities of $290.4 million, of which approximately $116.7 million was available.

The following table summarizes the impact on the Net debt that occurred in the nine-month period ended December 31, 2020 including related ratios:

Movement in Net debt[(1)(2)]

	361.3$ 9.5$ 12.9$ 3.4$ 16.5$ (18.9$) (64.5$) 320.2$
	As at March 31, 2020 Business acquisitions outlays, balance payable and contingent consideration payments Interests payment Share repurchases Dividend payment Proceeds from an investment Remaining net change of revolving facility and cash As at December 31, 2020
	(in thousands of Canadian dollars) December 31, 2020 March 31, 2020 LTM Adjusted EBITDA(2) 118,847 118,086 Synergies and Adjusted EBITDA(2)for the months prior to the business acquisitions which are not already reflected in the results 1,043 2,037 COVID-19 mandated store closures required anticipated rollouts and deployments to be deferred 1,000 - Pro Forma Adjusted EBITDA(2) 120,890 120,123 Net debt to Pro Forma Adjusted EBITDA(2) 2.65 3.01

Notes:

(1) In millions of Canadian dollars. (2) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 7.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Music Choice Litigation

On February 3, 2020, the Corporation and Music Choice executed and exchanged a Settlement Agreement which puts definitive end to the parties’ patent litigation in the United States and fully and finally settles all claims, counterclaims and defenses asserted in connection with that litigation. The settlement amount of US$13.3 million ($17.2 million at the date of the settlement), will be paid in two equal instalments; the first payment was made on the date of settlement and the second payment is to be made on or before February 15, 2021. The terms of the settlement do not impact the services currently offered by Stingray in the United States, which shall continue uninterrupted.

SOCAN and Re:Sound legal proceedings

From May 2, 2017 until May 10, 2017, the Corporation, together with its Canadian Broadcast Distribution Undertaking customers (together, the “Objectors”), presented an affirmative case before the Copyright Board of Canada to seek a reduction in the prescribed rates and terms for the Pay Audio Services Tariff for the 2007-2016 period. SOCAN and Re:Sound (together, the “Collectives”) opposed that case, but in the opinion of the Objectors failed to offer compelling alternatives other than a request to maintain the status quo.

As of December 2020, the Objectors and SOCAN have entered into a binding memorandum of understanding that will result in a partial refund to the Objectors of past royalties paid to Canadian collective societies and a meaningfully reduced tariff burden for the present and future. As a result, $4.4 million was recognized as a reduction of expenses in Q3 2021.

Further, the Copyright Board has pre-released elements of its decision and the tariff for consultative purposes indicating that the final decision and tariff will be issued within the coming months.

Contractual Obligations

The Corporation is committed under the terms of contractual obligations with various expiration dates, primarily the rental of office space, financial obligations under its credit agreement, broadcast licence and commitments for copyright royalties. There have been no material changes to these obligations since March 31, 2020.

Transactions Between Related Parties

The key management personnel of the Corporation are the Chief Executive Officer, Chief Financial Officer and certain other key employees of the Corporation. There have been no material changes to the nature or importance of the transactions between related parties since March 31, 2020.

Off-Balance Sheet Arrangements

The Corporation therefore has no off-balance sheet arrangements, except for the operating leases with terms of twelve months or less, leases of low-value assets or leases that are not in scope of IFRS 16, that have, or are reasonably likely to have, a current or future material effect on its consolidated financial position, financial performance, liquidity, capital expenditures or capital resources.

Disclosure of Outstanding Share Data

Issued and outstanding shares and outstanding stock options consisted of:

	January31,2021	December 31,2020
Issued and outstanding shares:
Subordinate voting shares	54,198,165	54,538,580
Subordinate voting shares held in trust through employee share
purchase plan	(4,273)	(59,283)
Variable subordinate voting shares	540,740	564,340
Multiple votingshares	17,941,498	17,941,498
	72,676,130	72,985,135
Outstanding stock options:
Stock options	3,204,950	3,204,950

The Corporation has a stock option plan to attract and retain employees, directors, officers and consultants. The plan provides for the granting of options to purchase subordinate voting shares. Under this plan,10% of all multiple voting shares, subordinate voting shares and variable subordinate voting shares issued and outstanding on a non-diluted basis is reserved for issuance. During the first nine months of Fiscal 2021, 39,035 options were exercised, 21,008 options were forfeited, and 833,174 options were granted to eligible employees, subject to service vesting periods of 4 years.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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Financial Risk Factors

The Corporation is exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk and interest risk). The interim consolidated financial statements and management discussion and analysis do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the annual financial statements as at March 31, 2020. The Corporation is not aware of any significant changes to the Corporation’s risk factors from those disclosed at that time.

Risk Factors

For a detailed description of risk factors associated with the Corporation, please refer to the “Risk Factors” section of the Corporation’s Annual Information Form dated June 3, 2020. The Corporation is not aware of any significant changes to the Corporation’s risk factors from those disclosed at that time.

Future Accounting Changes

For information on future accounting changes, please refer to the unaudited interim consolidated financial statements.

Evaluation of Disclosure Controls and Procedures

Internal control over financial reporting ("ICFR") is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and of the preparation of financial statements for external purposes in accordance with IFRS. The President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), together with Management, are responsible for establishing and maintaining adequate disclosure controls and procedures ("DC&P") and ICFR, as defined in National Instrument 52-109. The Corporation’s internal control framework is based on the criteria published in the updated version released in May 2013 of the report Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 COSO Framework”).

The Corporation’s management, under the supervision of the CEO and CFO, designed ICFR to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and based on 2013 COSO Framework. The DC&P have been designed to provide reasonable assurance that material information relating to the Corporation is made known to the CEO and CFO by others, and that information required to be disclosed by the Corporation in its annual filings, interim filings or other reports filed or submitted by the Corporation under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

During the third quarter ended December 31, 2020, there have been no changes in the Corporation’s internal control over financial reporting that have materially affected, or are likely to materially affect, the Corporation’s ICFR.

Subsequent Events

Dividend

On February 3, 2021, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend will be payable on or around March 15, 2021 to shareholders on record as of February 28, 2021.

Additional Information

Additional information about the Corporation is available on our website at www.stingray.com and on the SEDAR website at www.sedar.com.

Third Quarter Report 2021 | Stingray Group Inc. | Management’s Discussion and Analysis

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