Destiny Media Technologies Inc. (PNK:DSNY) Q1 2024 Earnings Call Transcript

Destiny Media Technologies Inc. (PNK:DSNY) Q1 2024 Earnings Call Transcript January 16, 2024

Destiny Media Technologies Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Rebecca Collins: Good afternoon, everyone. Thank you for joining us on today’s webinar. Before we begin, I’d like to announce that we will be referring to today’s earnings release, which was sent to the newswires earlier this afternoon. I’d also like to remind everyone that this conference call could contain forward-looking statements about Destiny Media Technologies within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon current beliefs and expectations of management and are subject to risks and uncertainties which could cause the actual results to differ materially from those forward-looking statements. Such risks are fully discussed in the company’s filings with SEC and SEDAR, and the company does not assume any obligation to update information contained on this call.

During the webinar, we will discuss certain non-GAAP financial measures. The non-GAAP financial measures are presented in the supplemental disclosures and should not be considered in isolation of, or as a substitute of, or superior to the financial information prepared in accordance with GAAP and should be read in conjunction with the company’s financial statements filed with the SEC and SEDAR. The non-GAAP financial measures used in the company’s presentation may differ from similarly titled measures presented by other companies. A reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures can be found in the earnings press release. Also, I would like to mention that following the presentation, there will be a questions-and-answers session, during which you can submit questions by selecting the raise hand icon at the bottom of your screen.

Your questions will be pulled in the order that they are received and at which point you will be prompted to unmute your microphone before speaking. With that, I would like to turn the call over to your host, Fred Vandenberg, Chief Executive Officer.

Fred Vandenberg: Thanks, Rebecca. Today, we have myself and Allan as usual on the call. I’m the CEO, and Allan heads up our Business Development Group. Today, we’re going to talk about a little bit of an overview of what we do and what we’re trying to do, then I will talk about our results of the quarter, and then I’ll pass it over to Allan, who will talk a little bit more about our specific business development efforts. So an overview of Play MPE. Play MPE is in the business of connecting artists and content creators with promotional destinations. The value that we provide really is maximizing the chance that an artist or a song gains popularity through broadcast or media review. So we provide an engaged audience, and in connecting the two, the content owners and the audience, many cases, our customers don’t know where to start.

They don’t know who to contact, and so our distribution channels are critical. In other cases, we provide – our platform provides an engaged audience and the results of that improved our customers’ marketing activities. I often talk about broadcast and radio because I think it’s the easiest way to understand what we do. It’s the easiest way for me to communicate what exactly we do. But it’s really a variety of destination types that we – that help market a song. And so, we grow our revenue by sending more content to more people. So, it’s really more customers, more songs, more recipients on the other side. And recently, so up until about the end of Q2 of fiscal 2022, so almost two years ago, we were really making huge investments in our global distribution platform, excuse me, to help Universal Music in their processes for international distribution.

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Q&A Session

So gigantic investment took years to do, and that really forms a core of our use. It’s quite complex, but it provides a lot of efficiencies and competitive advantages to Universal. It was that time that we made a shift in our ability to invest in things that would make it easier for our customers to grow outside Universal. It was quite an exciting time for us. It is an exciting time for us. I should qualify it a little bit here. We still have – we have a decent sized engineering team and it’s still a fair amount of effort in managing that global infrastructure. But we now have some capacity to work on things that are going to make it easier for us to sell both in our own backyard and to acquire new markets. So these things are really designed to accelerate revenue growth and they’ll complement each other.

And I really want to focus in on one thing today. We’re working on a bunch of things, but I think it’s better for us to – for me to communicate to our investors about one thing, so I’d give you a flavour of what we’re working on. That is our international lists. It’s had a palpable impact on our quarter. And here, we really have two competitive advantages that help us in that endeavour. One is that we have a presence in several countries. We have active recipients in several countries and inactive content flow. The other is we, because we invest more than in any platform that I’m aware of in this business, we have developed ways for our list management group to efficiently manage lists. That sort of helps us grow our lists holistically. And then when we have active recipients in many countries, we combine these efforts and create, and we did this last year, create international list.

So oftentimes we talk about markets and it’s easy to think about when we enter, say, a market. Well, we have active use in the United States from American content creators that go to U.S. recipients. So if you have — if you’re a country record label in the United States, you can send to country music stations in the United States. But early last year, we launched a series of — we started launching a series of international lists. We continued that throughout the year, but Allan will talk more about that. But when we look at growth, we look at labels that want to send to territories outside of their existing territory. So with our recent expansion of acquisition of territories like Canada and South Africa that have been developing over the last few years, we can start growing and growing our international lists and selling them.

So that’s essentially what we did last, the beginning of last year. So how did that impact our financial results? Well, this last quarter was our highest Play MPE revenue to date, highest Q1 revenue to date, and that revenue is in part influenced by this international list expansion. We grew our revenue by 10. 6%, when you adjust for foreign exchange, we had some favourable foreign exchange in the quarter. Unadjusted, we grew by 13%, a little over 13%. And that growth is split from new market acquisition, which is about a quarter to a third of that 10% growth. A quarter to a third of our traditional customer retention growth in our own backyard is, sorry, a quarter to a third of that 10% is from that growth. And between a third and about half of that growth, so almost 5%, roughly 5%, I should say, is from the provision of these international lists.

Independent record label is up almost 20% globally, and the EBITDA is about 300,000. This is a chart of our Play MPE revenue since, almost day one. If you look before P2006, we were working on developing the market for Play MPE, we just didn’t have any revenue. So there’s a lot of time where you do that chicken and egg, grow content and grow recipient activity. But this gives you a sense of, how we’ve grown revenue over the entire history of the company and I hope it gives you a sense of what we’re trying to do like in the last few quarters, our revenue growth with independents has really started to, it shows signs of a little bit more of a steeper trend there. And we’re going to continue to work on steepening that curve. The bottom line, I guess, you’d say is that our net income was, you know, about consistent with last year.

But once you carve out the amount we capitalized for software development. We’re growing our cash flow. EBITDA is roughly the same, but growing over time. That’s not our primary concern. We’re investing a lot into growth. With that, I’ll turn it over to Allan.

Allan Benedict: Thank you, Fred, and good afternoon, everyone. To continue on with the international genre bundles, as Fred mentioned, we first introduced our international genre lists in the first quarter of 2023. And we started out with nine options for clients looking to take their release to a global scale. In the Q3 of 2023, we introduced an international non -commercial genre list. And that was to meet a demand from independent artists that wanted to tackle public and community radio stations globally. These are the non-commercial stations that are typically more open to supporting independent artists and smaller labels as they’re not funded primarily by commercial revenues. So a lot of our indie artists were looking to tackle this market not only in their home territory, but across borders from there.