Destiny Media Technologies Inc. (PNK:DSNY) Q2 2024 Earnings Call Transcript

Destiny Media Technologies Inc. (PNK:DSNY) Q2 2024 Earnings Call Transcript April 15, 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 you 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 actual results to differ materially from those forward-looking statements. Such risks are fully discussed in the company’s filings with the SEC and SEDAR, and the company does not assume any obligation to update information contained in 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 SEC and SEDAR. The non-GAAP financial measures used in the company’s presentation may differ from the 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’ll be prompted to unmute your microphone before speaking. With that, I’d like to turn the call over to your host, Fred Vandenberg, Chief Executive Officer.

Fred Vandenberg: Thanks, Rebecca. Just before we start, today is Rebecca’s fifth anniversary with us. She’s a key member of our management group. She maintains our list and in-charge of all the release coordination that we do, as well as a lot more for this company, including running these webinars. So, it’s a good opportunity for me to just give her a shoutout and potentially embarrass her a little bit. But thanks Rebecca for all you do. To start, I will talk about — you just have me today. We’ll talk about our financial results. Q2 revenue is up 9%, year-to-date revenue is up 9.9%, so it’s pretty consistent quarter-to-quarter and pretty consistent over the last year, last two quarters of last year and first two quarters of this year.

Independent label revenue grew by 19.5% in Q1 and 10.5% in Q2 for a total growth of 15.6%. It’s roughly — well, it’s a little bit more than 50% of our revenue fairly consistently now. About half of that growth or half of that increase for independent label revenue is from the international list selection process and easier list selection processes. And I’ll touch on that just a little bit later when we talk about product a little bit. Year-to-date expenditures are up 23.3%. I think what I would say is that’s a little bit misleading. It includes a one-time increase, because we had a FX gain last year, foreign exchange gain last year. Depreciations forms about a third of that increase, and it’s really kind of doubling up expenditures associated with capitalized software development.

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Q&A Session

And we’re doing less of that now in this quarter. So, we kind of double up our increase. And so, it’s kind of artificially a little bit higher than you would see, or certainly the increases. But the real accurate picture is probably the bottom three bullet points on this slide. Year-to-date income is $120,000, EBITDA is $285,000, and capitalized software development costs is $280,000. So, EBITDA would be roughly flat if we weren’t capitalizing software development. So, it really tells you that we’re operating close to breakeven, and that’s in the context of us investing heavily for growth. Sorry. I will only stay on this slide very briefly. This is revenue over the last seven years and just kind of shows you the overall trends. You can see more recent quarters are starting to grow a little bit more.

I’m happy to answer any questions on that, but I don’t want to spend too much time on it. As far as non-financial things that occurred during the quarter, we transitioned our largest customer over the web browser version. That completed March 31st, but it was really done throughout the quarter. That sort of culminates into a cessation of our PC-based version of Caster, our release coordination, and that has been a very long process. We transitioned all of our customers, except for our largest, six years ago. And since that time, we’ve invested quite a lot into building out a number of global architecture, other global features that are required for Universal’s global distribution processes. It was a huge investment technically, and then moving all their users globally over to it was another significant effort.

So, pretty big step for us. Product updates: If I had to go back over the last couple years — sorry, last year, say, our focus last year was changing our product development leadership and processes. I won’t spend too much time on that because I’ve covered it in the past, but product really can help us grow revenue in a few different ways, five different ways I’ve got articulated here. The first is expanding our list creation and provision channels. Now, Play MPE is a distribution tool, so it sends music from record labels to promotional destinations. And really it started off as a tool that just provided that as a service. And we quickly realized that, in many cases, we can help the record labels know who to send to. So, we would curate these lists.

And that’s allowed us to grow. We don’t know any competitors that have anywhere close to the level of lists that we have, international lists. We, in fact, often encounter simple distribution tools that do no list curation. Last year, we did a number of things to start helping us expand that capacity. One of them was the international list presentation. So, when you have independent record labels, they’ll want to send to a broader audience instead of sending just to United States or just to Canada or whatever. You could now easily send to an international list through our platform. We made that process easier. We also are making the management of those lists a little bit more efficient, and we are also implementing some proprietary processes to help expand the overall recipient base.

So, there’s quite a lot of stuff that’s going on here, but ultimately it’s really just providing more distribution channels so we can sell more. And you can see that already toggling the revenue. But hopefully, our investments continue to accelerate that revenue growth. The second thing I have on here is that the product itself can assist in marketing. It’s one thing to have a very easy-to-use platform that people want to use and you can sell. But there’s other things that can go beyond that. And we have — because we have been able to improve our processes there, we have a couple of things that are probably worth mentioning here that’ll help us improve our marketing. You see the image here with Dolly Parton’s latest album; it’s #1 on our weekly streaming.

Now that’s on our charting page, which is now also not on a separate website. It’s in the Play MPE website. But now you can really easily select that. If it’s your artist or you are the artist, you can easily use that image to promote on social media. Now we’ve seen the labels do that, but now with this little addition to the platform, you can share on social media and you get the Play MPE branding. So, small change, but it’s one of those things that really helps get the Play MPE name out there. Another thing that we can — Play MPE product can help in marketing is by — is commenting. Within the platform, on the recipient side, you can now comment or request more from that artist or whatever. And these are really a good source of lead generations or repeat customer requests.

And these things are just implemented this year. But they’re small investments, but it just gives you a flavor of how products can help market the platform. And we are going to continue to make these efforts. Another thing is to help our platform grow at scale. With our investments on these global infrastructure things for Universal, it’s kind of delayed some investments in making it easy for us to sell a lot to new customers. One of the limiting factors is we are — like I said, Rebecca is in-charge of our release coordination. We do a lot of the releases for our labels and we quote it and charge it. Product itself is working on a checkout platform where it doesn’t involve staff and I think that’ll help us grow at scale, especially when we combine that with things we’re doing on the marketing side.