Stingray Group Inc. - Interim / Quarterly Report 2022

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Fiscal 2022 For the three-month period ended June 30, 2021
FIRST QUARTERREPORT
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Overview	3	Financial results for the periods ended
		June 30, 2021 and 2020	7
Key performance indicators	3
		Business segment performance	9
Financial and business highlights	4
		Liquidity and capital resources for the periods
Selected consolidated financial information	5	ended June 30, 2021 and 2020	14
Supplemental information on		Unaudited interim consolidated
Non-IFRS measures	6	financial statements	19

BASIS OF PREPARATION AND FORWARD-LOOKING STATEMENTS

The following is the quarterly financial report and 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 periods ended June 30, 2021 and 2020, and with the most recent audited consolidated financial statements and MD&A for the year ended March 31, 2021. This MD&A reflects information available to the Corporation as at August 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 periods ended June 30, 2021 and 2020.

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, 2021 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 operations 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 dividends 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.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

OVERVIEW

Montreal-based Stingray Group Inc. (TSX: RAY.A; RAY.B) is a leading music, media, and technology company with over 1,000 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, FAST channels, karaoke products, digital signage, in-store music, and music apps, which have been downloaded over 160 million times. Stingray reaches 400 million subscribers (or users) in 160 countries.

KEY PERFORMANCE INDICATORS[(1) ]

For the three-month period ended June 30, 2021 (“Q1 2022”):

$64.8 M $4.2 M $16.3 M ▲ 23.9% from Q1 2021 Or $0.06 per share ▼ 57.0% from Q1 2021 Revenues Net income Cash flow from operating activities Or $0.23 per share

$24.2 M $11.2 M $15.0 M ▼ 5.2% from Q1 2021 Or $0.16 per share ▼ 16.8% from Q1 2021 Adjusted EBITDA Adjusted Net income Adjusted free cash flow Or $0.21 per share

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

FINANCIAL AND BUSINESS HIGHLIGHTS

Highlights of the first quarter ended June 30, 2021:

Compared to the quarter ended June 30, 2020 (“Q1 2021”):

Revenues increased 23.9% to $64.8 million from $52.3 million;
Adjusted EBITDA[(1)] decreased 5.2% to $24.2 million from $25.5 million. Adjusted EBITDA[(1)] by segment was $14.7 million or 41.2% of revenues for Broadcasting and Commercial Music, $10.8 million or 37.0% of revenues for Radio and $(1.3) million for Corporate;
Net income was $4.2 million ($0.06 per share) compared with $7.0 million ($0.10 per share);
Adjusted Net income[(1)] of $11.2 million ($0.16 per share) compared with $13.5 million ($0.18 per share);
Cash flow from operating activities decreased 57.0% to $16.3 million compared to $38.0 million;
Adjusted free cash flow[(1)] decreased 16.8% to $15.0 million, or $0.21 per share, compared to $18.0 million or $0.25 per share;
Net debt to Pro Forma Adjusted EBITDA[(1)] ratio of 2.88x, and;
643,000 shares repurchased and cancelled for a total of $4.7 million.

Business Highlights:

On August 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 September 15, 2021 to shareholders on record as of August 31, 2021.
On July 5, 2021, the Corporation announced that it has acquired Calm Radio, the world’s largest online music streaming service focused on the wellness and relaxation markets. With this acquisition, Stingray grows its portfolio of curated music content, significantly increases its subscriber base and dives into the health and wellness industry.
On June 4, 2021, the Corporation announced that it has partnered with Shaw Communications Inc. to make its Stingray Music TV app available to all Shaw TV IPTV customers across Western Canada. Shaw TV customers will have access to 2,000 professionally curated channels in over 100 genres including pop, rock, hip-hop, indie, country music and more at no extra cost.
On May 5, 2021, the Corporation announced the launch of free, ad-supported TV channels and premium SVOD services with thirteen major OTT providers: Alteox (Luxembourg), Amazon Prime Video Channels (Italy, Spain and Netherlands), ChannelBox (United Kingdom), Maskatel (Canada), Pluto TV (Latin America and United States), Pzaz (Global), Rakuten TV (Europe), Redbox (United States), Rostelecom (Russia), Ruutu (Finland), Samsung TV Plus (Brazil, Mexico, Netherlands and Sweden) Totalplay (Mexico) and Zeasn (Austria and Germany). These distribution agreements grow Stingray’s audience over new platforms in new territories and add millions of potential viewers.
On April 28, 2021, the Corporation announced that free, ad-supported channels Qello Concerts by Stingray and Stingray Karaoke have become available on Samsung TV Plus Mobile in Germany and the UK. Mobile and tablet users will access both channels on Samsung’s free ad-supported video service through the TV Plus App and the Samsung Free page. The distribution agreements grow Stingray’s potential reach by millions of users. The service was launched in June 2021 in Austria and Switzerland.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(in thousands of Canadian dollars, except per share amounts)	3 months
	June 30, 2021 Q1 2022 June 30, 2020 Q1 2021 March 31, 2021 Q4 2021
	$ % 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(income)	64,808 100.0 % 52,293 100.0 % 60,316 100.0 % 42,907 66.2 % 28,294 54.2 % 38,941 64.6 % 9,447 14.6 % 9,523 18.2 % 9,821 16.3 % 5,253 8.1 % 4,601 8.8 % (7,284) (12.1) % – 0.0 % 892 1.7 % – 0.0 % 1,168 1.8 % (397) (0.8)% 2,714 4.5 %
Income before income taxes Income taxes	6,033 9.3 % 9,380 17.9 % 16,124 26.7 % 1,833 2.8 % 2,359 4.5 % 4,047 6.7 %
Net income	4,200 6.5 % 7,021 13.4 % 12,077 20.0 %
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)	24,155 37.3 % 25,481 48.7 % 23,638 39.2 % 11,238 17.3 % 13,509 25.8 % 11,981 19.9 % 16,337 25.2 % 37,993 72.7 % 24,514 40.6 % 15,007 23.2 % 18,045 34.5 % 13,808 22.9 % 331,129 – 336,776 – 326,405 – 2.88x – 2.91x – 2.81x – 0.06 – 0.10 – 0.17 – 0.16 – 0.18 – 0.17 – 0.16 – 0.18 – 0.16 – 0.23 – 0.52 – 0.34 – 0.21 – 0.25 – 0.19 – 35,578 54.9 % 35,947 68.7 % 36,356 60.3 % 29,230 45.1 % 16,346 31.3 % 23,960 39.7 %

Net income per share basic and diluted
Adjusted Net income per share basic(2)
Adjusted Net income per share 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
Revenues	64,808 100.0 % 52,293 100.0 % 60,316 100.0 %
Revenues by geography Canada United States Other Countries	41,376 63.8 % 28,057 53.7 % 35,594 59.1 % 10,278 15.9 % 10,302 19.7 % 10,942 18.1 % 13,154 20.3 % 13,934 26.6 % 13,780 22.8 %
Revenues	64,808 100.0 % 52,293 100.0 % 60,316 100.0 %

Notes:

(1) Interest paid during the Q1 2022 was $3.9 million (Q1 2021; $3.7 million and Q4 2021; $5.1 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 6.

(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 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

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:

(in thousands of Canadian dollars)	3 months
	June 30, 2021 Q1 2022 June 30, 2020 Q1 2021 March 31, 2021 Q4 2021
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(income)	4,200 7,021 12,077 5,253 4,601 (7,284) – 892 – 1,833 2,359 4,047 2,524 2,701 3,082 1,296 1,412 1,436 5,627 5,410 5,303 164 166 235 2,090 1,316 2,028 1,168 (397) 2,714
Adjusted EBITDA	24,155 25,481 23,638
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 (income)	(4,735) (3,338) (3,214) (1,833) (2,359) (4,047) (2,524) (2,701) (3,082) (1,296) (1,412) (1,436) (2,529) (2,162) 122
Adjusted Net income	11,238 13,509 11,981

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

(in thousands of Canadian dollars)	3 months
	June 30, 2021 Q1 2022 June 30, 2020 Q1 2021 March 31, 2021 Q4 2021
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 (gains) on foreign exchange Acquisition,legal,restructuringand other expenses(income)	16,337 37,993 24,514 (2,077) (703) (1,929) (198) (258) (194) (2,153) (1,552) (1,367) (3,891) (3,687) (5,142) (1,085) (1,214) (1,099) 6,805 (11,412) (344) 101 (725) (3,345) 1,168 (397) 2,714
Adjusted free cash flow	15,007 18,045 13,808

The following table shows the calculation of Net debt:

	June 30,	March 31,	June 30,
(in thousands of Canadian dollars)	2021	2021	2020
Credit facilities	305,779	303,704	303,504
Subordinated debt	31,766	31,741	39,665
Cash and cash equivalents	(6,416)	(9,040)	(6,393)
Net debt	331,129	326,405	336,776

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

FINANCIAL RESULTS FOR THE PERIODS ENDED JUNE 30, 2021 AND 2020

CONSOLIDATED PERFORMANCE

Revenues

Revenues are detailed as follows:

(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021 % Change
Revenues by geography Canada United States Other Countries	41,376 28,057 47.5 10,278 10,302 (0.2) 13,154 13,934 (5.6)
Revenues	64,808 52,293 23.9

Global

Revenues in Q1 2022 increased $12.5 million or 23.9% to $64.8 million, from $52.3 million for Q1 2021. The increase was primarily due the gradual easing of COVID-19 restrictions and the return to normal commercial operations, partially offset by the negative impact of foreign exchange.

Canada

Revenues in Canada in Q1 2022 increased $13.3 million or 47.5% to $41.4 million, from $28.1 million for Q1 2021. The increase was primarily due to the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

United States

Revenues in the United States in Q1 2022 remained stable at $10.3 million compared to Q1 2021, due to the negative impact of foreign exchange, largely offset by organic growth in advertising revenues in the Broadcast and Commercial Music segment.

Other Countries

Revenues in Other countries in Q1 2022 decreased $0.8 million or 5.6% to $13.1 million, from $13.9 million for Q1 2021. The decrease was primarily due to a decrease in subscriptions revenue.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

Operating expenses

Operating expenses in Q1 2022 increased $14.6 million or 51.6% to $42.9 million, from $28.3 million for Q1 2021. The operating expenses increase is due to lower Canadian Emergency Wage Subsidy (CEWS) (Q1 2022; $2.9 million and Q1 2021; $9.9 million), higher operating costs and increased variable expenses, caused by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Adjusted EBITDA[(1)]

Adjusted EBITDA in Q1 2022 decreased $1.3 million or 5.2% to $24.2 million from $25.5 million for Q1 2021. Adjusted EBITDA margin in Q1 2022 was 37.3% compared to 48.7% for Q1 2021. The decrease in Adjusted EBITDA is due to lower CEWS and higher operating costs, partially offset by higher revenues, caused by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Depreciation, amortization and write off

Depreciation, amortization and write off in Q1 2022 decreased $0.1 million or 0.8% to $9.4 million from $9.5 million for Q1 2021. The decrease was primarily due to less intangible assets to amortize compared to the prior period.

Net finance expense (income)

Net finance expense for Q1 2022 was $5.3 million compared to $4.6 million for Q1 2021. The increase was mainly related to a negative change in fair value of contingent consideration and to a lower foreign exchange gain.

Change in fair value of investments

In Q1 2022, there was no gain or loss on fair value of investments as the securities held in AppDirect Inc. were sold in Q3 2021. In Q1 2021, a loss of $0.9 million was recorded relating to an investment denominated in U.S. dollars converted to Canadian dollars.

Acquisition, legal, restructuring and other expenses (income)

(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021 % Change
Acquisition Legal Restructuringand other	14 282 (268) 991 (780) 1,771 163 101 62
Acquisition, legal, restructuring and other expenses(income)	1,168 (397) 1,565

In Q1 2021, a gain on legal expenses was recorded due to the reversal of a provision for professional fees due to a change in estimates in the current quarter.

Income taxes

The income taxes expense recognized in comprehensive income was $1.8 million for Q1 2022 compared to an income taxes expense of $2.4 million for Q1 2021. The effective tax rate for Q1 2022 was 30.4% compared to 25.2% for Q1 2021. The variance in the effective tax rate is mainly due to the relative importance of permanent differences compared to Net income before income taxes.

Net income and net income per share

Net income in Q1 2022 was $4.2 million ($0.06 per share) compared to a Net income of $7.0 million ($0.10 per share) for Q1 2021. The decrease was mainly related to a gain on legal expenses in Q1 2021, to lower operating results and to a negative change in fair value of contingent consideration, partially offset by a loss on fair value of investments recorded in Q1 2021.

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

Adjusted Net income in Q1 2022 was $11.2 million ($0.16 per share), compared to $13.5 million ($0.18 per share) for Q1 2021. The decrease was mainly related to lower operating results and to a negative change in fair value of contingent consideration.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

BUSINESS SEGMENT PERFORMANCE

BROADCASTING AND COMMERCIAL MUSIC

BROADCASTING ANDCOMMERCIALMUSIC
(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021 % Change
Revenues Operatingexpenses	35,578 35,947 (1.0) 20,916 15,580 34.2
Adjusted EBITDA(1)	14,662 20,367 (28.0)
Adjusted EBITDA margin(1)	41.2% 56.7% (27.3)

Revenues

In Q1 2022, Broadcasting and Commercial Music revenues decreased $0.3 million or 1.0% to $35.6 million, from $35.9 million for Q1 2021. The decrease was primarily due to a negative foreign exchange rate impact, largely offset by an increase in advertising revenue and by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Adjusted EBITDA[(1)]

In Q1 2022, Broadcasting and Commercial Music Adjusted EBITDA decreased $5.6 million or 28.0% to $14.7 million from $20.3 million for Q1 2021. The decrease in Adjusted EBITDA is due to lower CEWS and higher operating costs, both caused by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

RADIO

RADIO
(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021 % Change
Revenues Operatingexpenses	29,230 16,346 78.8 18,405 10,585 73.9
Adjusted EBITDA(1)	10,825 5,761 87.9
Adjusted EBITDA margin(1)	37.0% 35.2% 5.1

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 did not follow historical patterns due to the ongoing impact of the COVID-19 pandemic.

In Q1 2022, Radio revenues increased $12.9 million or 78.8% to $29.2 million from $16.3 million for Q1 2021. The increase was largely due to the gradual easing of COVID-19 restrictions and the return to normal commercial operations..

Adjusted EBITDA[(1)]

In Q1 2022, Radio Adjusted EBITDA increased $5.1 million or 87.9% to $10.8 million from $5.7 million for Q1 2021. The increase in Adjusted EBITDA is due to higher revenues, partially offset by lower CEWS and higher operating costs, all caused by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

CORPORATE

CORPORATE
(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021 % Change
Operating expenses Adjust: Share-based compensation Performance and deferred share unit expense	3,586 2,129 68.4 (164) (166) (1.2) (2,090) (1,316) 58.8
Adjusted EBITDA(1)	(1,332) (647) 105.9

Adjusted EBITDA[(1)]

Corporate Adjusted EBITDA represents 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 increased operating costs caused by the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

Quarterly results

Revenues fluctuated over the last eight quarters from $76.6 million in the second quarter of Fiscal 2020 to $64.8 million in the first quarter of Fiscal 2022. The increase in Q3 2020 was 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 were due to progressive improvements in Radio advertising bookings as provinces began lifting restrictions on social and economic activity and to normal business seasonality. The decrease in Q4 2021 was due to normal business seasonality. The increase in Q1 2022 is due to the gradual easing of COVID-19 restrictions and the return to normal commercial operations.

Adjusted EBITDA[(1)] fluctuated over the last eight quarters from $27.7 million in the second quarter of Fiscal 2020 to $24.2 million in the first quarter of Fiscal 2022. The increase in Q3 2020 was mainly due to normal business seasonality in the Radio segment. The decreases 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 was 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 was due to continuing improvements in Radio advertising bookings and normal business seasonality and to a settlement with SOCAN (refer to page 17), partially offset by a special bonus to employees, lower CEWS and higher operating costs. The decrease in Q4 2021 was due to normal business seasonality and to a settlement with SOCAN in Q3 2021, partially offset by a special bonus to employees in Q3 2021. The increase in Q1 2022 is due to normal business seasonality and change in product mix, partially offset by higher operating costs.

Net income (loss) fluctuated over the last eight quarters from a net income of $5.2 million in the second quarter of Fiscal 2020 to $4.2 million in the first quarter of Fiscal 2022. 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 markto-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 markto-market losses on derivative financial instruments and a foreign exchange gain, partially offset by the impact of the COVID19 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 consideration, 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. In Q4 2021, the decrease was due to lower operating results, partially offset by higher gains in mark-to-market on derivative financial instruments. In Q1 2022, the decrease was due to a negative change in fair value of mark-to-market on derivative financial instruments and a lower foreign exchange gain, partially offset by lower income taxes expense, and lower acquisition and restructuring costs.

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

Summary of Consolidated Quarterly Results

(in thousands of Canadian dollars, exceptper share amounts)	3 months
	June 30, 2021 March 31, 2021 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019
	FY2022 FY2021 FY2021 FY2021 FY2021 FY2020 FY2020 FY2020
Revenues by segment Broadcasting and Commercial Music Radio	35,578 36,356 40,186 39,169 35,947 38,483 39,894 38,742 29,230 23,960 32,379 25,125 16,346 29,915 41,419 37,831
Total revenues Revenues by geography Canada United States Other countries	64,808 60,316 72,565 64,294 52,293 68,398 81,313 76,573 41,376 35,594 47,368 39,710 28,057 43,498 57,515 52,723 10,278 10,942 10,693 10,091 10,302 10,236 9,575 9,035 13,154 13,780 14,504 14,493 13,934 14,664 14,223 14,815
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(1) Adjusted Net income per share diluted(1) Cash flow from operations Adjusted free Cash Flow(1)	64,808 60,316 72,565 64,294 52,293 68,398 81,313 76,573 24,155 23,638 33,993 31,156 25,481 28,217 31,033 27,671 112,942 114,268 118,847 115,887 112,402 118,086 112,276 108,462 4,200 12,077 14,118 11,888 7,021 (8,486) 8,089 5,184 0.06 0.17 0.19 0.16 0.10 (0.11) 0.11 0.07 11,238 11,981 21,054 16,311 13,509 10,095 16,710 12,416 0.16 0.17 0.29 0.22 0.18 0.13 0.22 0.16 0.16 0.16 0.29 0.22 0.18 0.13 0.22 0.16 16,337 24,514 16,333 25,406 37,993 14,062 28,833 18,952 15,007 13,808 19,645 22,861 18,045 17,974 21,033 18,756
Quarterly dividend	0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.070

Note:

(1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6. 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.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

Reconciliation of Quarterly Non-IFRS Measures

(in thousands of Canadian dollars)	3 months
	June 30, 2021 March 31, 2021 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019
	Fiscal 2022 Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2020 Fiscal 2020 Fiscal 2020
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)	4,200 12,077 14,118 11,888 7,021 (8,486) 8,089 5,184 5,253 (7,284) (1,290) 2,774 4,601 33,463 (4,383) 6,362 – – 2,434 461 892 (1,914) (4,781) (188) 1,833 4,047 4,900 4,654 2,359 (4,165) 1,897 2,479 2,524 3,082 2,894 2,976 2,701 2,790 2,876 2,989 1,296 1,436 1,399 1,413 1,412 1,426 1,402 1,419 5,627 5,303 5,478 5,188 5,410 5,659 5,494 5,935 164 235 231 219 166 258 238 257 2,090 2,028 1,780 1,312 1,316 (1,507) 677 794 1,168 2,714 2,049 271 (397) 693 19,524 2,440
Adjusted EBITDA	24,155 23,638 33,993 31,156 25,481 28,217 31,033 27,671
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, CRTC Tangible benefits, mark-to- market losses (gains) on derivative financial instruments and acquisition, legal, restructuring and other expenses(income)	(4,735) (3,214) (1,727) (4,340) (3,338) (10,976) (4,184) (5,767) (1,833) (4,047) (4,900) (4,654) (2,359) 4,165 (1,897) (2,479) (2,524) (3,082) (2,894) (2,976) (2,701) (2,790) (2,876) (2,989) (1,296) (1,436) (1,399) (1,413) (1,412) (1,426) (1,402) (1,419) (2,529) 122 (2,019) (1,462) (2,162) (7,095) (3,964) (2,601)
Adjusted Net income	11,238 11,981 21,054 16,311 13,509 10,095 16,710 12,416

(in thousands of Canadian dollars)	3 months
	June 30, 2021 March 31, 2021 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sept. 30, 2019
	Fiscal 2022 Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2021 Fiscal 2020 Fiscal 2020 Fiscal 2020
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)	16,337 24,514 16,333 25,406 37,993 14,062 28,833 18,952 (2,077) (1,929) (1,849) (1,209) (703) (2,153) (1,479) (1,459) (198) (194) (649) (212) (258) (463) (495) (292) (2,153) (1,367) (1,838) (1,671) (1,552) (1,534) (1,286) (1,559) (3,891) (5,142) (6,312) (2,912) (3,687) (3,819) (4,150) (4,493) (1,085) (1,099) (1,255) (1,443) (1,214) (1,180) (1,295) (1,303) 6,805 (344) 15,858 6,530 (11,412) 7,262 (17,702) 6,143 101 (3,345) (2,692) (1,899) (725) 5,106 (917) 327 1,168 2,714 2,049 271 (397) 693 19,524 2,440
Adjusted free cash flow	15,007 13,808 19,645 22,861 18,045 17,974 21,033 18,756

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES FOR THE PERIODS ENDED JUNE 30, 2021 AND 2020

(in thousands of Canadian dollars)	3 months
	Q1 2022 Q1 2021
Operating activities Financing activities Investingactivities	16,337 37,993 (14,537) (31,599) (4,424) (2,513)
Net change in cash Cash – beginningofperiod	(2,624) 3,881 9,040 2,512
Cash – end ofperiod	6,416 6,393
Adjusted free cash flow(1)	15,007 18,045

Operating activities

Cash flow generated from operating activities amounted to $16.3 million for Q1 2022 compared to $38.0 million for Q1 2021. The decrease was mainly due to the negative change in non-cash operating items, to higher legal expenses and to lower operating results.

Financing activities

Net cash flow used in financing activities amounted to $14.5 million for Q1 2022 compared to $31.6 million for Q1 2021. The decrease was primarily due to lower repayment of credit facilities, partially offset by higher shares repurchased and by the repayment of contingent consideration for the acquisition of Marketing Sensorial México (MSM).

Investing activities

Net cash flow used in investing activities amounted to $4.4 million for Q1 2022 compared to $2.5 million for Q1 2021. The increase was primarily due to higher capital expenditures.

Adjusted free cash flow[(1)]

Adjusted free cash flow generated in Q1 2022 amounted to $15.0 million compared to $18.0 million for Q1 2021. The decrease was mainly related to higher capital expenditures and to lower operating results.

Note: (1) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

CONSOLIDATED FINANCIAL POSITION

The following table shows the main variances that have occurred in the consolidated financial position of the Corporation for the three-month period ended June 30, 2021:

	June 30,	March 31,
(in thousands of Canadian dollars)	2021	2021	Variance		Significant contributions
Trade and other receivables	61,832	61,114	718	▲	Timing ofpayments by clients
					Additions through business
Intangible assets	51,896	41,884	10,012	▲	acquisition of Calm Radio, partially offset by amortization of intangible
					assets
Goodwill	337,273	337,897	(624)	▼	Foreignexchange differences
Accounts payable and accrued liabilities	53,940	53,146	794	▲	Timing of payments to suppliers
					Balance payable and contingent
					consideration on business
Other liabilities	65,545	60,027	5,518	▲	acquisition of Calm Radio, partially offset by repayment of contingent
					consideration for the acquisition of
					MSM
Creditfacilities	305,779	303,704	2,075	▲	Referto the graphon next page
Subordinated debt	31,766	31,741	25	▲	Amortization of deferred financing fees

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

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.

The credit facilities consist of a $325.0 million revolving credit facility and a $69.4 million term loan, both maturing in October 2023. On May 28, 2021, the Corporation fully repaid, on maturity, its $20.0 million term loan.

The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial drawdown of the $69.4 million 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 June 30, 2021, the Corporation had cash and cash equivalents of $6.4 million, a subordinated debt of $31.8 million and credit facilities of $305.8 million, of which approximately $87.2 million was available.

The following table summarizes the impact on the Net debt that occurred in the three-month period ended June 30, 2021 including related ratios:

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

	$326.4 $1.5 $3.9 $4.7 $5.4 $(10.8) $331.1 As at March 31, 2021 Business acquisitions outlays, balance payable and contingent consideration payments Interests payment Share repurchases Dividend payment Remaining net change of revolving facility and cash As at June 30, 2021
(in thousands of Canadian dollars) June 30, 2021 March 31, 2021
Last Twelve Months (LTM) Adjusted EBITDA(2) 112,942 114,268 Synergies and Adjusted EBITDA(2)for the months prior to the business acquisitions which are not already reflected in the results 842 190 COVID-19 mandated store closures required anticipated rollouts and deployments to be deferred 1,369 1,825
Pro Forma Adjusted EBITDA(2) 115,153 116,283
Net debt to Pro Forma Adjusted EBITDA(2) 2.88 2.81

Notes:

(1) In millions of Canadian dollars.

(2) Refer to “Supplemental information on Non-IFRS measures” on page 2 and 6. See page 12 to reconcile with LTM Adjusted EBITDA

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

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, 2021.

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, 2021.

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:

	July31,2021	June 30,2021
Issued and outstanding shares:
Subordinate voting shares	53,178,697	53,216,497
Subordinate voting shares held in trust through employee share
purchase plan	(15,834)	(14,792)
Variable subordinate voting shares	382,805	377,705
Multiple voting shares	17,941,498	17,941,498
	71,487,166	71,520,908
Outstanding stock options:
Stock options	3,471,085	3,471,085

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 three months of Fiscal 2022, 60,000 options were exercised and 367,831 options were granted to eligible employees, subject to service vesting periods of 4 years.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

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, 2021. The Corporation is not aware of any significant changes to the 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 2, 2021. 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 first quarter ended June 30, 2021, 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.

Management’s assessment of and conclusion on the design and the effectiveness of the Corporation’s ICFR as at August 3, 2021, did not include the controls or procedures of the operations of Calm Radio. The Corporation has accordingly availed itself of provision 3.3(1)(b) of Regulation 52-109 which permits exclusion of these acquisitions in the design and operating effectiveness assessment of its ICFR for a maximum period of 365 days from the date of acquisition.

Subsequent Events

Dividend

On August 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 September 15, 2021 to shareholders on record as of August 31, 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.

First Quarter Report 2022 | Stingray Group Inc. | Management’s Discussion and Analysis

Consolidated Statements of Comprehensive Income

Three-month periods ended June 30, 2021 and 2020

Consolidated Statements of Comprehensive Income Three-month periods ended June 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts) (Unaudited) Note	3 months
	June 30, June 30, 2021 2020
Revenues 5 Operating expenses Depreciation, amortization and write-off Net finance expense (income) 6 Change in fair value of investments 14 Acquisition, legal, restructuring and other expenses (income) 7	$ 64,808 $ 52,293 42,907 28,294 9,447 9,523 5,253 4,601 — 892 1,168 (397)
Income before income taxes Income taxes	6,033 9,380 1,833 2,359
Net income	$ 4,200 $ 7,021

Net income per share — Basic and Diluted	$ 0.06 $ 0.10
Weighted average number of shares – Basic Weighted average number of shares – Diluted	71,815,810 73,575,016 72,362,785 73,650,598
Comprehensive income Net income Other comprehensive loss Items that may be reclassified to profit and loss Exchange differences on translation of foreign operations	$ 4,200 $ 7,021 (863) (708)
Total other comprehensive loss	(863) (708)
Total comprehensive income	$ 3,337 $ 6,313

Net income is entirely attributable to Shareholders of the Corporation.

The accompanying notes are an integral part of these interim consolidated financial statements.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Consolidated Statements of Financial Position

June 30, 2021 and March 31, 2021

June 30, 2021 and March 31, 2021
(In thousands of Canadian dollars)	Note		June 30,		March 31,
(Unaudited)			2021		2021
Assets
Current assets
Cash and cash equivalents		$	6,416	$	9,040
Trade and other receivables			61,832		61,114
Income taxes receivable			2,326		3,801
Inventories			3,168		3,215
Other current assets			15,974		13,439
			89,716		90,609
Non-current assets
Property and equipment	8		41,060		42,228
Right-of-use assets on leases	8		26,748		28,184
Intangible assets, excluding broadcast licences	8		51,896		41,884
Broadcast licences	8		272,988		272,988
Goodwill	8		337,273		337,897
Investments			3,301		3,046
Other non-current assets			1,318		1,335
Deferred tax assets			3,480		4,666
Total assets		$	827,780	$	822,837
Liabilities and Equity
Current liabilities
Credit facilities	9	$	7,500	$	27,462
Accounts payable and accrued liabilities			53,940		53,146
Dividend payable			—		5,409
Deferred revenues			6,066		4,970
Current portion of lease liabilities	10		4,139		4,479
Current portion of other liabilities	11		23,906		15,812
Income taxes payable			8,991		9,211
			104,542		120,489
Non-current liabilities
Credit facilities	9		298,279		276,242
Subordinated debt			31,766		31,741
Deferred revenues			1,176		—
Lease liabilities	10		24,854		25,733
Other liabilities	11		41,639		44,215
Deferred tax liabilities			51,752		49,725
Total liabilities			554,008		548,145
Shareholders’ equity
Share capital	12		310,544		313,951
Contributed surplus			5,328		5,180
Deficit			(36,970)		(40,172)
Accumulated other comprehensive loss			(5,130)		(4,267)
Total equity			273,772		274,692
Subsequent event (note15)
Total liabilities and equity		$	827,780	$	822,837

The accompanying notes are an integral part of these interim consolidated financial statements.

Approved by the Board of Directors,

(Signed) Eric Boyko, Director (Signed) Pascal Tremblay, Director

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Consolidated Statements of Changes in Equity

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, except number of share capital) (Unaudited)	Share Capital Accumulated other comprehensive income (loss) Number Amount Contributed surplus Deficit Cumulative Translation Account Defined BenefitPlans Total shareholder’s equity
Balance at March 31, 2020 Issuance of shares upon exercise of options Dividends Share-based compensation Employee share purchase plan Net income Other comprehensive loss	73,549,454 $ 322,366 $ 4,620 $ (56,407) $ 3,891 $ (574) $ 273,896 14,035 55 (23) — — — 32 — — — (5,518) — — (5,518) — — 138 — — — 138 (15,255) (81) 81 — — — — — — — 7,021 — — 7,021 — — — — (708) — (708)
Balance at June 30, 2020	73,548,234 $ 322,340 $ 4,816 $ (54,904) $ 3,183 $ (574) $ 274,861
Balance at March 31, 2021 Issuance of shares upon exercise of options (note 12) Dividends Repurchase and cancellation of shares (note 12) Share-based compensation Employee share purchase plan (note 12) Net income Other comprehensive loss	72,111,588 $ 313,951 $ 5,180 $ (40,172) $ (3,775) $ (492) $ 274,692 60,000 321 (43) — — — 278 — — — 32 — — 32 (643,000) (3,655) — (1,030) — — (4,685) — — 118 — — — 118 (7,680) (73) 73 — — — — — — — 4,200 — — 4,200 — — — — (863) — (863)
Balance at June 30, 2021	71,520,908 $ 310,544 $ 5,328 $ (36,970) $ (4,638) $ (492) $ 273,772

The accompanying notes are an integral part of these interim consolidated financial statements.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Consolidated Statements of Cash Flows

Three-month periods ended June 30, 2021 and 2020

Three-month periods ended June 30, 2021 and 2020
(In thousands of Canadian dollars) (Unaudited) Note	3months
	June 30, 2021 June 30, 2020
Operating activities: Net income $ 4,200 $ 7,021 Adjustments for: Depreciation, amortization and write-off 9,447 9,523 Share-based compensation, PSU and DSU expenses 2,254 1,482 Interest expense and standby fees 6 3,462 3,639 Mark-to-market losses on derivative financial instruments 6 518 1,263 Change in fair value of investments — 892 Share of results of joint venture 58 (10) Change in fair value of contingent consideration 6 586 (516) Depreciation, amortization and accretion of other liabilities 6 510 793 Interest expense on lease liabilities 6, 10 417 389 Income tax expense 1,833 2,359 Income taxes paid (143) (254)
23,142 26,581 Net changein non-cashoperatingitems 13 (6,805) 11,412
16,337 37,993 Financing activities: Increase (decrease) of credit facilities 1,757 (20,915) Payment of dividend (5,377) (5,518) Proceeds from the exercise of stock options 278 32 Shares repurchased and cancelled (4,685) — Shares purchased under the employee share purchase plan (73) (81) Interest paid (3,891) (3,687) Payment of lease liabilities (1,085) (1,214) Repayment ofother liabilities (1,461) (216)
(14,537) (31,599) Investing activities: Business acquisition, net of cash acquired 3 314 — Acquisition of an investment (310) — Acquisition of property and equipment (2,077) (703) Acquisition of intangible assets other than internally developed intangible assets (198) (258) Additiontointernally developedintangible assets (2,153) (1,552)
(4,424) (2,513)
Increase (decrease) in cash and cash equivalents (2,624) 3,881 Cash and cash equivalents,beginningofperiod 9,040 2,512
Cash and cash equivalents,end ofperiod $ 6,416 $ 6,393

The accompanying notes are an integral part of these interim consolidated financial statements.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

1. BUSINESS DESCRIPTION AND BASIS OF CONSOLIDATION

Stingray Group Inc. (the “Corporation”) is incorporated under the Canada Business Corporations Act . The Corporation is domiciled in Canada and its registered office is located at 730 Wellington, Montréal, Québec, H3C 1T4. The Corporation is a provider of multi-platform music services. It broadcasts high quality music and video content on a number of platforms including radio stations, premium television channels, digital TV, satellite TV, IPTV, the Internet, mobile devices and game consoles. A portion of the Corporation’s revenue is 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 did not follow historical patterns due to the ongoing impact of the coronavirus (“COVID-19”) pandemic.

These interim consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, Stingray Music USA Inc., 2144286 Ontario Inc., 4445694 Canada Inc., Pay Audio Services Limited Partnership, Music Choice Europe Limited, Stingray Digital International Ltd., Stingray Europe B.V., Transmedia Communications SA, SBA Music PTY Ltd., Stingray Music, S.A. de C.V., DJ Matic NV, Stingray Radio Inc. and Calm Radio Corp. and all these entities’ wholly owned subsidiaries.

The auditors of the Corporation have not performed a review of the interim financial report for the three-month periods ended June 30, 2021 and 2020.

2. SIGNIFICANT CHANGES AND HIGHLIGHTS

The interim consolidated financial position and performance of the Corporation was particularly affected by the following events and transactions during the three-month period ended June 30, 2021:

On June 30, 2021, the Corporation signed an agreement to acquire all of the outstanding shares of Calm Radio, a provider of online music focused on the wellness and relaxation markets, for total consideration of $8,171. It resulted in the recognition of goodwill (note 8), intangible assets (note 8) and contingent consideration (note 11).
On May 28, 2021, the Corporation fully repaid, on maturity, its $20,000 term loan. Refer to note 9 for more information.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

3. BUSINESS ACQUISITIONS

FISCAL 2022

Calm Radio Corp.

On June 30, 2021, the Corporation purchased all of the outstanding shares of Calm Radio, an online music streaming service focused on the wellness and relaxation markets, for total consideration of $8,171. As a result of the acquisition, goodwill of $39 was recognized related to the operating synergies expected to be achieved from integrating the acquired business into the Corporation’s existing business. The goodwill will not be deductible for tax purposes.

The fair value of acquired trade receivables was $149, which represented the gross contractual amount. The contingent consideration arrangement requires the Corporation to pay, in cash, to the former owners, an amount not exceeding $8,000 over the next three years ending in August 2024, based on recurring monthly revenues targets. The fair value of the contingent consideration was determined using an income approach based on the estimated amount and timing of projected cash flows.

Had the acquisition occurred at the beginning of the fiscal year, revenues related to this acquired business would have been approximately $935 and net income would have been $51.

		Preliminary
Assets acquired:
Cash and cash equivalents	$	314
Trade and other receivables		149
Other current assets		104
Property and equipment		83
Intangible assets		12,728
Goodwill		39
Deferred taxassets		142
		13,559
Liabilities assumed:
Accounts payable and accrued liabilities		208
Deferred revenues		1,872
Deferred tax liabilities		3,308
		5,388
Net assets acquired at fair value	$	8,171
Consideration given:
Balance payable on business acquisition	$	4,000
Contingent consideration		3,912
Working capital payable		259
	$	8,171

As of the reporting date, the Corporation has not completed the purchase price allocation over the identifiable net assets and goodwill as information to confirm the fair value of certain assets and liabilities remains to be obtained.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

FISCAL 2021

Marketing Sensorial México

On May 6, 2020, the Corporation purchased all of the assets of Marketing Sensorial México, (“MSM”) for total consideration of MXN 127,759 ($7,433). MSM is a Mexican leader in point-of-sale marketing solutions. As a result of the acquisition, goodwill of $2,947 was recognized related to the operating synergies expected to be achieved from integrating the acquired business into the Corporation’s existing business. The intangible assets and goodwill will be deductible for tax purposes.

The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this acquisition and no adjustment to the preliminary assessment have been recorded in the consolidated statements of financial position.

		Final
Assets acquired :
Property and equipment	$	1,765
Intangible assets		2,721
Goodwill		2,947
Net assets acquired at fair value	$	7,433
Consideration given :
Balance payable on business acquisition	$	5,236
Contingent consideration		2,197
	$	7,433

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

4. SEGMENT INFORMATION

OPERATING SEGMENTS

The Corporation’s operating segments are aggregated in two segments: Broadcasting and commercial music and Radio . The operating segments reflect how the Corporation manages its operations, resources and assets and how it measures its performance. Both operating segment’s financial results are reviewed by the Chief operating decision maker (“CDOM”) to make decisions about resources to be allocated to the segment and asses its performance based on adjusted earnings before interest, taxes, depreciation and amortization (thereafter “Adjusted EBITDA”), and for which distinct financial information is available. Adjusted EBITDA excludes from income before income taxes the following expenses: share-based compensation, performance and deferred share unit expense, depreciation, amortization and write-off, net finance expense (income), change in fair value of investments and acquisition, legal, restructuring and other expenses. There are no intersegment revenues for the periods.

The Broadcasting and commercial music segment specializes in the broadcast of music and videos on multiple platforms and digital signage experiences and generates revenues from subscriptions or contracts.

The Radio segment operates several radio stations across Canada and generates revenues from advertising.

Corporate and eliminations is a non-operating segment comprising corporate and administrative functions that provide support and governance to the Corporation’s operating business units.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

The following tables present financial information by segment for the three-month periods ended June 30, 2021 and 2020.

	Broadcasting and commercial music Radio Corporate and eliminations Consolidated
	Q1 2022 Q1 2021 Q1 2022 Q1 2021 Q1 2022Q1 2021 Q1 2022 Q1 2021
Revenues Operating expenses (excluding Share- based compensation and PSU and DSU expenses)	$ 35,578 $ 35,947 $ 29,230 $ 16,346 $ — $ —$ 64,808 $ 52,293 20,916 15,580 18,405 10,585 1,332 647 40,653 26,812
Adjusted EBITDA Share-based compensation PSU and DSU expenses Depreciation, amortization and write-off Net finance expense (income) Change in fair value of investments Acquisition, legal, restructuring and other expenses (income)	14,662 20,367 10,825 5,761 (1,332) (647) 24,155 25,481 164 166 164 166 2,090 1,316 2,090 1,316 9,447 9,523 9,447 9,523 5,253 4,601 5,253 4,601 — 892 — 892 1,168 (397) 1,168 (397)
Income before income taxes Income taxes	6,033 9,380 1,833 2,359
Net income	$ 4,200 $ 7,021

In Fiscal 2021, the Corporation applied and qualified for the Canada Emergency Wage Subsidy (“CEWS”), a Canadian federal government program created in response to the negative economic impact of the COVID 19 pandemic and designed to provide financial assistance to businesses who experienced a certain level of decrease in revenues to help them retain their employees. During the three-month period ended June 30, 2021, the Corporation recognized, as a reduction of operating expenses, the subsidies claimed under the CEWS and other programs amounting to $2,876 (2020 – nil).

The Corporation also received tax credits related to its research and development and multimedia activities, which amounted $548 (2020 – $281) and was recorded as a reduction of operating expenses.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

		Broadcasting and	Broadcasting and				Corporate and	Corporate and
		commercial music		Radio			eliminations			Consolidated
		June 30,	March 31,	June 30,	March 31,		June 30,	March	31,	June 30,	March 31,
		2021	2021	2021		2021	2021	2021		2021	2021
Total assets	$	220,794	$ 217,256 $ 606,986		$	605,581 $	—	$	—$ 827,780		$ 822,837
Total liabilities(1)	$	94,971	$ 85,194 $ 115,604		$	116,727 $	343,433	$ 346,224$ 554,008			$ 548,145

(1) Total liabilities include operating liabilities, the Credit facilities and the Subordinated debt

		Broadcasting and	Broadcasting and
		commercial music			Radio		Consolidated
		Q1 2022	Q1	2021	Q1 2022	Q1 2021	Q1 2022	Q1 2021
Acquisition of property
and equipment	$	1,337 $		3,082 $	334 $	145$	1,671 $	3,227
Addition to
right-of-use assets on
leases	$	49 $		394 $	128 $	12$	177 $	406
Acquisition of intangible
assets	$	15,326 $		4,432 $	— $	—$	15,326 $	4,432
Goodwill recorded on
business acquisitions	$	39 $		2,947 $	— $	—$	39 $	2,947

Acquisition of property and equipment, intangible assets, broadcast licences and goodwill, includes those acquired through business acquisitions, whether they were paid or not.

Approximately 80% of the Corporation’s non-current assets are located in Canada.

5. REVENUES

DISAGGREGATION OF REVENUES

The following table presents the Corporation’s revenues disaggregated by reportable segment, primary geographical market and product.

market and product.
		Reportable	segments
For the three-month period ended		Broadcasting and
June 30, 2021		commercial music		Radio		Total revenues
Geography
Canada	$	12,146	$	29,230	$	41,376
United States		10,278		—		10,278
Other countries		13,154		—		13,154
		35,578		29,230		64,808
Products
Subscriptions(1)		31,605		—		31,605
Equipment and labor(2)		2,169		—		2,169
Advertising(2)		1,804		29,230		31,034
	$	35,578	$	29,230	$	64,808

(1) Generally recognized over time

(2) Generally recognized at a point in time

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

For the three-month period ended June 30, 2020	Reportable segments Broadcasting and commercial music Radio Total revenues
Geography Canada $ United States Other countries	11,711 $ 16,346 $ 28,057 10,302 — 10,302 13,934 — 13,934
	35,947 16,346 52,293
Products Subscriptions(1) Equipment and labor(2) Advertising(2)	31,307 — 31,307 3,815 — 3,815 825 16,346 17,171
$	35,947 $ 16,346 $ 52,293

(1) Generally recognized over time

(2) Generally recognized at a point in time

6. NET FINANCE EXPENSE (INCOME)

NET FINANCE EXPENSE(INCOME)
	3months
	June 30,2021 June 30,2020
Interest expense and standby fees Mark-to-market losses on derivative financial instruments Change in fair value of contingent consideration Depreciation, amortization and accretion of other liabilities Interest expense on lease liabilities Foreign exchangegain	$ 3,462 $ 3,639 518 1,263 586 (516) 510 793 417 389 (240) (967)
	$ 5,253 $ 4,601

7. ACQUISITION, LEGAL, RESTRUCTURING AND OTHER EXPENSES (INCOME)

	3months
	June 30,2021 June 30,2020
Acquisition Legal Restructuringand other	$ 14 $ 282 991 (780) 163 101
	$ 1,168 $ (397)

During the three-month period ended June 30, 2021, acquisition expenses, related to completed business acquisitions, amounting to $14 (2020 – $282) are included in acquisition expenses.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

8. PROPERTY AND EQUIPMENT, RIGHT-OF-USE-ASSETS ON LEASES, INTANGIBLE ASSETS, BROADCAST LICENCES AND GOODWILL

		Property	Right-of-use	Right-of-use
		and		assets on		Intangible		Broadcast
	equipment			leases		assets		licences		Goodwill
Year ended March 31, 2021
Net book amount as at March 31, 2020	$	45,732	$	29,460	$	54,490	$	272,910	$	337,824
Additions		6,493		4,697		8,933		78		—
Additions through business acquisition		1,765		—		2,721		—		2,947
Disposals and write-off		(1,058)		(372)		(2,457)		—		—
Depreciation of property and equipment		(10,907)		—		—		—		—
Depreciation of right-of-use assets on leases		—		(5,614)		—		—		—
Amortization of intangible assets		—		—		(21,379)		—		—
Foreignexchange differences		203		13		(424)		—		(2,874)
Net book amount as at March 31, 2021	$	42,228	$	28,184	$	41,884	$	272,988	$	337,897
Three-month period ended June 30, 2021
Net book amount as at March 31, 2021	$	42,228	$	28,184	$	41,884	$	272,988	$	337,897
Additions		1,588		177		2,598		—		—
Additions through business acquisition		83		—		12,728		—		39
Disposals and write-off		(156)		(307)		—		—		—
Depreciation of property and equipment		(2,368)		—		—		—		—
Depreciation of right-of-use assets on leases		—		(1,296)		—		—		—
Amortization of intangible assets		—		—		(5,627)		—		—
Foreignexchange differences		(315)		(10)		313		—		(663)
Net book amount as at June 30, 2021	$	41,060	$	26,748	$	51,896	$	272,988	$	337,273

9. CREDIT FACILITIES

The total credit facilities consist of a $325,000 revolving credit facility and a remaining $69,375 term loan, both maturing in October 2023. On May 28, 2021, the Corporation fully repaid, on maturity, its $20,000 term loan.

The table below is a summary of the Credit facilities:

June 30, 2021	Total	available		Drawn	Letterofcredit	Letterofcredit		Net available
Committed credit facilities
Revolving facility	$	325,000	$	237,066	$	750	$	87,184
Term facility		69,375		69,375		—		—
Total committed credit facilities	$	394,375	$	306,441	$	750	$	87,184
Less:unamortized deferredfinancingfees				(662)
Balance, end of period				305,779
Current portion			$	7,500
Non-currentportion			$	298,279

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

March 31, 2021	Totalavailable	Totalavailable		Drawn	Letterofcredit	Letterofcredit		Net available
Committed credit facilities
Revolving facility	$	325,000	$	213,434	$	750	$	110,816
Term facilities		91,250		91,250		—		—
Total committed credit facilities	$	416,250	$	304,684	$	750	$	110,816
Less: unamortized deferred financing fees				(980)
Balance, end of period				303,704
Current portion			$	27,462
Non-currentportion			$	276,242
As at June 30, 2021, letters of credit amounting to $750 (2020 –			$750)	reduced the	availability on the		revolving facility.
The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial drawdown amount
he term facility. The remaining capital balance will be payable on maturity date, on					October 25, 2023.
						Capital repayments of
							the term facility
2022							$	7,500
2023								61,875
							$	69,375

As at June 30, 2021, letters of credit amounting to $750 (2020 – $750) reduced the availability on the revolving facility.

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

10. LEASE LIABILITIES

The following table presents a summary of the activity related to the lease liabilities of the Corporation for the three-month periods ended June 30, 2021 and 2020:

	3months
	June 30, 2021 June 30, 2020
Lease liabilities, beginning of period $ Additions Payment of lease liabilities, including related interest Reassessment of the lease term Interest expense on lease liabilities Foreignexchange differences	30,212 $ 30,853 177 406 (1,502) (1,603) (300) (248) 417 389 (11) 23
Lease liabilities, end ofperiod $	28,993 $ 29,820
Lease liabilities included in the Consolidated statements of financial position Current portion $ Non-current portion $	June 30, 2021 March 31, 2021 4,139 $ 4,479 24,854 $ 25,733
$	28,993 $ 30,212

The following table presents the maturity analysis of contractual undiscounted cashflows related to the lease liabilities of the Corporation as of June 30, 2021:

Less than one year	$	6,123
One to five years		16,600
More than five years		16,057
Total undiscounted lease liabilities as at June 30, 2021	$	38,780

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

11. OTHER LIABILITIES

OTHER LIABILITIES
	June	30, 2021	March	31, 2021
CRTC tangible benefits	$	28,121	$	27,970
Contingent consideration		17,493		14,456
Balance payable on business acquisitions		4,063		100
Accrued pension benefit liability		5,962		6,112
Derivative financial instruments		5,888		5,370
Performance share unit payable		2,494		4,478
Other		1,524		1,541
		65,545		60,027
Current portion		(23,906)		(15,812)
	$	41,639	$	44,215

12. SHARE CAPITAL

Authorized:

Unlimited number of subordinate voting shares, participating, without par value

Unlimited number of variable subordinate voting shares, participating, without par value

Unlimited number of multiple voting shares (10 votes per share), participating, without par value

Unlimited number of special shares, participating, without par value

Unlimited number of preferred shares issuable in one or more series, non-participating, without par value

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

Issued and outstanding:

The movements in share capital were as follows:

	Number of		Carrying
	shares		amount
Year ended March 31, 2021
Subordinate voting shares and variable subordinate voting shares
As at March 31, 2020	55,607,956	$	304,140
Exercise of stock options	80,732		269
Repurchased and cancelled	(1,530,180)		(8,700)
Purchased andheldintrust throughemployee share purchase plan	11,582		16
As at March 31, 2021	54,170,090	$	295,725
Multiple voting shares
As atMarch31,2020 and2021	17,941,498	$	18,226
	72,111,588	$	313,951
Three-month period ended June 30, 2021
Subordinate voting shares and variable subordinate voting shares
As at March 31, 2021	54,170,090	$	295,725
Exercise of stock options	60,000		321
Repurchased and cancelled	(643,000)		(3,655)
Purchased andheldintrust throughemployee share purchase plan	(7,680)		(73)
As at June 30, 2021	53,579,410	$	292,318
Multiple voting shares
As atMarch31,2021and June 30,2021	17,941,498	$	18,226
	71,520,908	$	310,544

Transactions for the three-month period ended June 30, 2021

During the period, 60,000 stock options were exercised and consequently, the Corporation issued 60,000 subordinate voting shares. The proceeds amounted to $278. An amount of $43 of contributed surplus related to those stock options was transferred to the subordinate voting shares’ account balance.

On March 24, 2021, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting share, multiple voting share and subscription receipts. A dividend payable of $5,409 was accrued in the consolidated statement of financial position as at March 31, 2021. The dividend paid on June 15, 2021 was $5,377, which resulted in an adjustment of $32 in consolidated statements of changes in equity for the three-month period ended June 30, 2021.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

Share repurchase program

On September 23, 2020, the Toronto Stock Exchange (the "TSX") approved the implementation of a share repurchase program, which took effect on September 29, 2020. This program allows the Corporation to repurchase up to an aggregate 3,485,155 subordinate voting shares and variable subordinate voting shares (collectively, the "Subordinate Shares"), representing approximately 10% of the Subordinate Shares issued and outstanding as at September 21, 2020. In accordance with TSX requirements, the Corporation is entitled to purchase, on any trading day, up to a total of 32,265 Subordinate Shares, representing 25% of the net average daily trading volume of the Subordinate Shares. When making such repurchases, the number of Subordinate Shares in circulation is reduced and the proportionate interest of all remaining shareholders in the Corporation's share capital is increased on a pro rata basis. All shares repurchased under the share repurchase program will be cancelled upon repurchase. The share repurchase period will end no later than September 24, 2021.

The following table summarizes the Corporation's share repurchase activities during the three-month period ended June 30, 2021:

Subordinate voting shares repurchased for cancellation_(unit)_		643,000
Average price per share	$	7.2855
Total repurchase cost	$	4,685
Repurchase resulting in a reduction of:
Share capital	$	3,655
Deficit(1)	$	1,030

(1) The excess of net repurchase cost over the average book value of the Subordinate voting shares.

13. SUPPLEMENTAL CASH FLOW INFORMATION

	3months
	June 30,2021 June 30,2020
Trade and other receivables Inventories Other current assets Other non-current assets Accounts payable and accrued liabilities Deferred revenues Income taxes payable Other liabilities	$ (623) $ 8,709 43 (799) (2,450) 1,618 14 82 (1,555) 2,243 390 114 (420) 218 (2,204) (773)
	$ (6,805) $ 11,412

Additions to property and equipment and intangible assets, excluding broadcast licences and intangible assets acquired through business combinations, not affecting cash and cash equivalents amounted to $(406) (2021 — $2,524) and $247 (2021 — $(99)), respectively, during three-month periods ended June 30, 2021 and 2020.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

14. FINANCIAL INSTRUMENTS

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 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, 2021. The Corporation is not aware of any significant changes to the Corporation’s risk factors from those disclosed at that time.

FAIR VALUES

The Corporation has determined that the carrying amount of cash and cash equivalents, trade and other receivables, accounts payable and accrued liabilities and current portion of other liabilities excluding the contingent consideration is a reasonable approximation of their fair value due to the short-term maturity of those instruments. As such, information on their fair values is not presented below. The fair value of the credit facilities approximates its carrying value as it bears interest at prime or banker’s acceptance rates plus a credit spread, which approximate current rates that could be obtained for debts with similar terms and credit risk. The fair value of derivative financial instruments is determined using an evaluation of the estimated market value, adjusted for the credit quality of the counterparty. The carrying amount of CRTC tangible benefits and balance payable on business acquisitions is a reasonable approximation of their fair value as they are discounted using the effective interest rate, which approximate current rates that could be obtained with similar terms and credit risk.

The carrying and fair value of financial assets and liabilities, including their level in the fair value hierarchy, consist of the following:

As at June 30, 2021	Carrying value	Carrying value		Fair value		Level 1		Level 2		Level 3
Financial assets measured at amortized cost
Cash and cash equivalents	$	6,416
Trade and other receivables		58,941
Financial assets measured at fair value
Investments	$	1,210	$	1,210	$	—	$	—	$	1,210
Financial liabilities measured at
amortized cost
Credit facilities	$	305,779
Subordinated debt		31,766
Accounts payable and accrued liabilities		51,592
CRTC tangible benefits		28,121
Accrued pension benefit liability		5,962
Balance payable on business acquisitions		4,063
Financial liabilities measured at fair value
Contingent consideration	$	17,493	$	17,493	$	—	$	—	$	17,493
Derivative financial instruments		5,888		5,888		—		5,888		—

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

Notes to Interim Consolidated Financial Statements

(In thousands of Canadian dollars, unless otherwise stated)
(Unaudited)
As at March 31, 2021	Carrying value			Fair value		Level 1		Level 2		Level 3
Financial assets measured at amortized cost
Cash and cash equivalents	$	9,040
Trade and other receivables		57,891
Financial assets measured at fair value
Investments	$	900	$	900	$	—	$	—	$	900
Financial liabilities measured at
amortized cost
Credit facilities	$	303,704
Subordinated debt		31,741
Accounts payable and accrued liabilities		49,398
CRTC tangible benefits		27,970
Accrued pension benefit liability		6,112
Balance payable on business acquisitions		100
Financial liabilities measured at fair value
Contingent consideration	$	14,456	$	14,456	$	—	$	—	$	14,456
Derivative financial instruments		5,370		5,370		—		5,370		—
Fair value measurement (Level 3):

Fair value measurement (Level 3):
				Contingent
		Investments		consideration
Three-month period ended June 30, 2020
Opening amount as at March 31, 2020	$	23,548	$	17,831
Additions through business acquisition		—		2,197
Change in fair value		(892)		(516)
Settlements		—		(138)
Balance as at June 30, 2020	$	22,656	$	19,374
Three-month period ended June 30, 2021
Opening amount as at March 31, 2021	$	900	$	14,456
Additions through business acquisition		—		3,912
Addition		310		—
Change in fair value		—		586
Settlements		—		(1,461)
Balance as at June 30, 2021	$	1,210	$	17,493

There were no changes in the valuation techniques for the contingent consideration and investments during the three-month periods ended June 30, 2021 and 2020.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

INVESTMENTS

The Corporation has two equity instruments in private entities:

Space Factory Media Inc.

The fair value of the equity instrument in a private entity, Space Factory Media Inc., was estimated using a market comparison technique. The valuation model is based on market multiples derived from quoted price of companies comparable to the investment and the expected EBITDA on the investment.

The equity instrument in a private entity is classified as a financial asset at fair value through profit and loss.

The fair value of the investment as at June 30, 2021 was $310.

Nextologies

The fair value of the equity instrument in a private entity, Nextologies, was estimated using a market comparison technique. The valuation model is based on market multiples derived from quoted price of companies comparable to the investment and the expected EBITDA on the investment.

The equity instrument in a private entity is classified as a financial asset at fair value through profit and loss.

The fair value of the investment as at June 30, 2021 and 2020 was $900.

AppDirect

During the year ended March 31, 2021, the Corporation disposed of its investment in AppDirect. The fair value of the investment as at June 30, 2020 was $21,756.

For the three-month periods ended June 30, 2020, the fair value was measured by using the equity price from the latest external significant equity financing transaction, minus a liquidity discount of 15%. The liquidity discount was used to reflect the marketability of the asset. In measuring fair value, management used the best information available in the circumstances and also an approach that it believes market participants would use. There was no change in the fair value of this instrument during this three-month period as there were no external equity financing transactions or no other indicators of significant changes that could affect the fair value of the investment.

The equity instrument in a private entity was classified as a financial asset at fair value through profit and loss.

CONTINGENT CONSIDERATION

The contingent consideration related to business combinations is payable based on the achievement of targets for growth in revenues for a period from the date of the acquisition and upon renewal of client contracts. The fair value measurement of the contingent consideration is determined using unobservable (Level 3) inputs. These inputs include (i) the estimated amount and timing of projected cash flows; and (ii) the risk-adjusted discount rate used to present value the cash flows, which is based on the risk associated with the revenue targets being met. The contingent consideration is classified as a financial liability and is included in other liabilities (Note 11). The change in fair value is recognized in net finance expense (income) (Note 6).

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated) (Unaudited)

DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation use derivative financial instruments to manage its interest rate risk on its credit facilities. These include interest rate swaps and swaptions.

The table below summarize the interest rate contracts effective as at June 30, 2021 and March 31, 2021:

		Fixed interest			Mark-to-market	Mark-to-market		Mark-to-market
		rate (when	Initial	nominal	liabilities as at			liabilities as at
Maturity	Currency	applicable)		value	June 30,2021			March31,2021
Swaps
October 25, 2024	CAD	0.81%	$	50,000	$	828	$	945
October 25, 2024	CAD	1.33%		50,000		257		403
October 25, 2021	CAD	2.19%		50,000		280		494
October 25,2024	CAD	2.29%		50,000		1,631		1,938
				200,000		2,996		3,780
Swaptions
October 25, 2024	CAD	—		100,000		1,219		642
October 25,2024	CAD	—		100,000		1,673		948
			$	200,000	$	2,892	$	1,590
			$	400,000	$	5,888	$	5,370

15. SUBSEQUENT EVENT

Dividend

16. BASIS OF PREPARATION

a) Statement of compliance:

These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) on a basis consistent with those accounting policies followed by the Corporation in the most recent audited consolidated annual financial statements. These interim consolidated financial statements have been prepared on a form in accordance with IAS 34 “Interim Financial Reporting”. Accordingly, certain information, in particular the accompanying notes, normally included in the consolidated annual financial statements prepared in accordance with IFRS, has been omitted or condensed. Income taxes in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the note thereto for the year ended March 31, 2021.

The interim consolidated financial statements were authorized for issue by the Board of Directors on August 3, 2021.

b) Use of estimates and judgments:

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

Notes to Interim Consolidated Financial Statements

Three-month periods ended June 30, 2021 and 2020

(In thousands of Canadian dollars, unless otherwise stated)

(Unaudited)

In preparing these interim consolidated financial statements, the significant judgments made by management in applying the Corporation’s accounting policies and the key sources of information were the same as the ones applied to the audited consolidated financial statements for the year ended March 31, 2021.

c) Functional and presentation currency:

These interim consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand.

First Quarter Report 2022 | Stingray Group Inc. | Interim Consolidated Financial Statements

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Stingray Group Inc. — Interim / Quarterly Report 2022

47293_rns_2021-08-03_060eea0e-8bc9-4e71-be28-919e761848bb.pdf

TABLE OF CONTENTS

BASIS OF PREPARATION AND FORWARD-LOOKING STATEMENTS

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

OVERVIEW

KEY PERFORMANCE INDICATORS[(1) ]

FINANCIAL AND BUSINESS HIGHLIGHTS

Highlights of the first quarter ended June 30, 2021:

Business Highlights:

SELECTED CONSOLIDATED FINANCIAL INFORMATION

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

The following tables show the reconciliation of Net income to Adjusted EBITDA and to Adjusted Net income:

The following table shows the calculation of Net debt:

CONSOLIDATED PERFORMANCE

Revenues

Global

Canada

United States

Other Countries

Operating expenses

Adjusted EBITDA[(1)]

Depreciation, amortization and write off

Net finance expense (income)

Change in fair value of investments

Acquisition, legal, restructuring and other expenses (income)

Income taxes

Net income and net income per share

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

BUSINESS SEGMENT PERFORMANCE

BROADCASTING AND COMMERCIAL MUSIC

Revenues

Adjusted EBITDA[(1)]

RADIO

Revenues

Adjusted EBITDA[(1)]

CORPORATE

Adjusted EBITDA[(1)]

Quarterly results

Summary of Consolidated Quarterly Results

Reconciliation of Quarterly Non-IFRS Measures

LIQUIDITY AND CAPITAL RESOURCES FOR THE PERIODS ENDED JUNE 30, 2021 AND 2020

Operating activities

Financing activities

Investing activities

Adjusted free cash flow[(1)]

CONSOLIDATED FINANCIAL POSITION

Capital Resources

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

SOCAN and Re:Sound legal proceedings

Contractual Obligations

Transactions Between Related Parties

Off-Balance Sheet Arrangements

Disclosure of Outstanding Share Data

Financial Risk Factors

Risk Factors

Future Accounting Changes

Evaluation of Disclosure Controls and Procedures

Subsequent Events

Dividend

Additional Information

Consolidated Statements of Comprehensive Income

Three-month periods ended June 30, 2021 and 2020

Consolidated Statements of Financial Position

June 30, 2021 and March 31, 2021

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

1. BUSINESS DESCRIPTION AND BASIS OF CONSOLIDATION

2. SIGNIFICANT CHANGES AND HIGHLIGHTS

3. BUSINESS ACQUISITIONS

FISCAL 2022

FISCAL 2021

Marketing Sensorial México

4. SEGMENT INFORMATION

OPERATING SEGMENTS

5. REVENUES

DISAGGREGATION OF REVENUES

6. NET FINANCE EXPENSE (INCOME)

7. ACQUISITION, LEGAL, RESTRUCTURING AND OTHER EXPENSES (INCOME)

Stingray Group Inc. Interim / Quarterly Report 2022