Destiny Media Technologies Inc. (PNK:DSNY) Q2 2025 Earnings Call Transcript

Destiny Media Technologies Inc. (PNK:DSNY) Q2 2025 Earnings Call Transcript April 14, 2025

Rebecca Collins: Good afternoon everyone. Thank you for joining us on today’s webinar. Before we begin, I’d like to announce that we’ll 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 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’d like to mention that following the presentation, there will be a question-and-answer session which – during which you can submit your questions by selecting the raise hand icon at the bottom of your screen.

Your questions will be pulled in the order that they’re received, and at which point you will 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. Hi everyone, welcome to Q2. Year-to-date revenue was up 4.9%. For the quarter, it was up 3.3%. This is a little bit less than the growth we’ve seen in the immediately preceding quarter, or the growth over the last couple of years. But we’ve seen some very positive signs for growth in our customer acquisition strategies, and we think this will result in positive long-term sustainable growth. Our independent customers represent about 50%, of our revenue on average in Q2. That’s a little smaller of a percentage, because of the demand, seasonal demand, but in that group total customers are up by 4.4%, new customers are up 8%, and then there’s a modest increase in the number of releases and there’s a 2.6% increase in customer retention.

We’ve also seen an improvement in sales conversion rates, and the speed of conversion. What we have also seen is a 4% drop in the average spending per release. We think that the majority of that, is caused by discounts that we’ve put in place. These discounts were part of our overall checkout feature that, we’re building and we had to standardize those discounts, across the platform. The demand in this context is pretty inelastic, relatively inelastic. So we’re probably going to address this going forward, and modify the adjustments and how they’re calculated. Expenditures are up 18.2%. The majority of that increase, is well more than actually that increases, is due to one-time non-repeating legal expenses of $230,000 and some non-cash amortization expense increases.

Q&A Session

That’s offset by some reductions in salaries and wages that, the majority of which are long-term repeatable. There’s going to be some increases associated with – as we add some more staff. We’ve created this schedule in the slide to show, kind of another non-GAAP measure where we’ve adjusted net income, to remove all the, or sorry deduct all the capitalized costs that we’ve incurred in the period. Add back the amortization, add back the one-time cost of the litigations, and some other non-cash expenses. And just to show you, what our real cash flow is longer term cash flow, and it shows a net margin of about 9%. That gives a sense of where we’re at given the loss. Our long-term business strategy, is really to achieve sustainable accelerated revenue growth through new market acquisition, gaining market share in new territories, and to put that into real specific strategies.

We’re really trying to leverage our customers and users to grow Play MPE. If you look at Play MPE, it’s akin to a social media platform, but in the music promotion space. And if we make the right investments in the platform, we can help get our users to drive growth. Now what we did in the quarter, is we released a feature called Invited Connection. We plan to build on this and try different things to get recipients to drive that growth. If I was to draw a parallel here, it would be something like LinkedIn where you know, in the beginning of what in LinkedIn’s existence. They were a platform to post your resume and that sort of thing. It’s involved and now it’s evolved into a lot more. We have a vision of doing similar things, and building on the Invited Connection.

Our priority here really, is to drive revenue growth so we can invest more into revenue growth. The more users we have on the platform, the faster we can grow. We also added some new features into our list management process. Our list management group really is actively maintaining our recipient lists, which is the products we sell. Our list is – our lists are really a significant driver of our overall value proposition. They are 200% more active than our best customer owned lists. So we do the job a lot better than our customers can. And how we maintain this, these lists is proprietary through proprietary processes that we’ve developed over quite a number of years. This is just a change, to help make that group a little bit more efficient.

And with this change, we are looking to leverage that group into adding more recipients, and recipient types to essentially broaden our product line. As well we made some SEO improvements, and with those list of management improvements, we’re working on acquiring new recipient types. As far as our customer acquisition investments go, from a platform perspective, the main thing we’re working on is self-service checkout. So this will allow us to really scale. And earlier in this year, we released a self-sign on. During Q2, we released full service checkout. So really what we split our independent customers into two types, full service and self-service. The full service customers require more staff involvement. We our staff prepared the release and that we’ve added the checkout feature there.

If done well, we think that this will open many doors to grow independent use in new territories. And at the same time, concurrently, we’re investing into a lot of marketing improvements. We restructured the website last year, and we continue to improve the site score. We get higher SEO rankings, so search terms that are relevant to us, get higher and higher rankings, and we’re going to continue to do that. The site speed is a lot higher, and now we’re working on preparing for a global expansion with the website. MTR is the new radio tracking software that, is growing quite well. February was our, so the last month of the last quarter was our highest month in revenue, and that we continue to see really good improvements in customer acquisition, customer retention, revenue growth.

But it’s still a small product, because it’s currently only tracking single songs. And where we’ll see the real growth, is when we can sell to larger customers that will track more songs. And we have to build out the ability for that – for those customers to pay, but also to add features that will allow them to manage multi songs. And that we’re looking towards later on in this year, this fiscal year to add those features. And with that I will turn it over to questions.

A – Rebecca Collins: Great, thank you, Fred. So if you do have a question, please use the raise hand option at the bottom of your screen and your question will be pulled in the order that they are received. If you raise your, please ensure you have access to a microphone. And if you wish to retract that question, please just click that raise hand icon again to lower your hand. Your camera will remain off once prompted, but please do unmute your microphone before speaking. Looks like we do have one raised hand from LJ Goldstein. Do you want to unmute your microphone and go ahead.

Fred Vandenberg: Larry, I think you may need to unmute your mic.

Rebecca Collins: Okay. Maybe we can come back if you’re just check of sorting that out. And Tom, do you want to go ahead.

Unidentified Analyst: Hello.

Rebecca Collins: Hi.

Unidentified Analyst: Hi Fred.

Fred Vandenberg: Hi.

Unidentified Analyst: My first question is regarding the contract with Universal. I think it’s been expired for a year now, and you guys have been like on a month, a month. Has there been any progress with them?

Fred Vandenberg: Well, I would say there’s been progress in the sense that we continue to grow their use. The contract is sort of a revolving month-to-month. It’s a 30-day notice period. Right now, I mean, there hasn’t been much in the ways of talks there, and quite frankly, I don’t think that it’s a problem that – they’re seen for that. So it’s just rolling forward.

Unidentified Analyst: Okay. So it’s, I thought it was like the point was to kind of like sign a longer term contract or something. So it’s like that 30-day notice. Like does that current contract include any kinds of prices hike so or not?

Fred Vandenberg: It does an annual price hike. Yes. I mean the best answer, I would have for that, is I think if it’s not broke, don’t fix it. I would prefer to have a longer term deal. But that’s just the, hyper risk aversion. I don’t see that as a, I mean their use is growing there, there’s nothing that would I would see as a problem. Our value continues to grow with them. We continue to develop the Play MPE platform. And I don’t, yes I don’t see anything there to be concerned about.

Unidentified Analyst: Yes. Okay cool. Yes, I was thinking, because of the last eight gear regarding that last year meant like, was talking about signing a longer term contract, but now I understand that it’s on a…?

Fred Vandenberg: Well – I mean yes, who’s kidding who, I would rather have a 10-year guaranteed contract, but…

Unidentified Analyst: Yes, yes I know.

Fred Vandenberg: But everything’s going well with them.

Unidentified Analyst: Thank you. And do you anticipate you guys to like disclose the meter revenue at some point, or like just, I know it’s the first time you guys are disclosing some kind of growth measure in the press release, but…?

Fred Vandenberg: It’s currently less than 1% of our revenue and I, until we launch the enterprise capabilities where we can capture a lot of customers with a lot more users, sorry songs I don’t. I mean, I think our revenue continues to grow and it’s, really nice to see. But the percentages look great, but the – how it impacts our total revenue is, is not material until we can acquire larger customers.

Unidentified Analyst: And is it mostly customers that are currently using Play MPE, or like what’s the…?

Fred Vandenberg: Yes, the majority of it is, not all though. And I think, we’re making inroads into figuring out, how we sell to customers that are not originally Play MPE customers. What we found last year is that customers, we were marketing digitally and customers were not, really searching for what we provide – providing, because no one thought we had that even existed. So you’re not going to look for something that, you don’t think exists. But now I think, we’re making improvements in customer acquisition for that that doesn’t have, a Play MPE basis or origin. And we’re also seeing customers that we attract for meter that are now becoming Play MPE customers. And – we see a growth in our new customers, and I think that in part is from, having that second product.

Unidentified Analyst: Okay. Thank you. I’ve read like in the financials, you were talking about marketing costs increasing. Is it like hiring other people? What kind of position are you looking to hire, if it’s related to that?

Fred Vandenberg: It’s a bit of a combination of outside site expertise, consultants and more staffing. Whether that’s new staff or reallocated staff is a different question. But there’s more staff, and I think going forward it will look at whether we get a return on that investment. But I think with checkout, our plan for checkout really is, is essentially where we can sell to certain markets that are poised for acquisition. So that means really where we have regular use, by relevant industry professionals. But we have very little independent use or none. And so, we want to get into those territories and sell, and sometimes selling to those territories, is really more of numbers game. And where you sell where our full service staff don’t prepare that release, so they can self-sign up, self-checkout. And so, the marketing costs associated that – with that – we expect to look at a positive ROI, and we’ll increase it where we see that.

Unidentified Analyst: Okay. Thank you. And then, is there any plan to kind of like do investor outreach? I know it’s been touched a couple times in the past few calls. I guess you were waiting for higher revenue growth, to kind of launch that again, it feels like it’s been on and off, or like talked about for a while, but it’s not really happening. Is it, like at some point you’ll do it anyway or?

Fred Vandenberg: I mean, I expect to see higher revenue growth soon, but I think regardless of whether we see that we will, I believe we will have the capacity to be a bit more smart about our investor outreach very shortly.

Unidentified Analyst: Yes, thank you. I don’t want to take all the time. I think I had one more question. Like how, is the Board involved in either the use of cash balance, or any types of strategic decision in the past couple quarters? Are they the main like driver of like deciding to reshuffle, let’s say the marketing department, or like the direction of it, or are they more laid back and just?

Fred Vandenberg: I would say the Board’s heavily involved in the overall strategy, that’s influenced by our management group, of course. I mean, we just met with them for two days at the AGM in February. So there’s a lot of strategy discussions with the Board and.

Unidentified Analyst: Like buyback. Sorry is like, is the buyback considered in any fashion or not, considering the stock price, and how much accretive it could be? I know there’s not tons of volume on the Canadian side, but there’s been quite a lot of volume on the American side, maybe not last couple of weeks, but I don’t know?

Fred Vandenberg: The volume on the Canadian side is hidden. What you see on, Yahoo Finance or wherever you look for your volume numbers, that they only disclose what’s traded on the TSX, which is incomplete. In fact, it’s traded on other exchanges in Canada.

Unidentified Analyst: Yes, yes.

Fred Vandenberg: So you – it’s very, very difficult to get a whole picture of the volume, but as far as the buyback goes, we do look at it. I’m not thrilled about the stock price where it’s at, of course, but there’s a. I think until we do maybe a bit more investor outreach, or show faster growth, you’re going to I mean, I think the stock price will reflect our growth as soon as we show it. I mean, I think we’re undervalued as it is. But I can say that until I’m blue in the face. Doesn’t you know do any good until you attract more investors.

Unidentified Analyst: Yes. All right. Thanks for your time, Fred.

Fred Vandenberg: No problem.

Rebecca Collins: Thank you, Tom. Larry, if you want to try and go ahead and unmute your microphone, you can take your question.

Unidentified Analyst: Do you ever listen to past calls?

Fred Vandenberg: Yes, I do, yes.

Unidentified Analyst: I do, too. And what is recurrent, are the same adjectives and really the same words. There’s always something, and it’s now what is the two years since you’re one of your big competitors, went out of business?

Fred Vandenberg: Okay. You’re talking about [All Access.

Unidentified Analyst: I don’t recall the name, but it was one of your bigger ones, I think in Canada.

Fred Vandenberg: I think you’re thinking of All Access. And All Access was acquired by, ended up being acquired. They were going to shut down and they ended up being acquired by another company. So they’re still effectively in business.

Unidentified Analyst: So what do you think, is the size of your market plural?

Fred Vandenberg: So for Play MPE I think, that it’s very difficult to calculate that, but I would say it’s at least the addressable markets, at least $40 million in radio only promotion. But promotion itself is something where we can expand user types, so music supervisors, influencers, media.

Unidentified Analyst: You don’t have to go into detail. Just what do you think of the size of your market?

Fred Vandenberg: Well, again, the addressable market for Play MPE is a lot bigger than $40 million. It’s just, calculating that in what where we’re at right now, is a little bit challenging, but MTR.

Unidentified Analyst: Challenging what way, how’s it challenging?

Fred Vandenberg: Well, it depends on where we go. And I mean, to figure out the volume of what releases are going out, and how much they’ll pay for it is, you can do that in two different ways. But top down or bottom up, and I – it’s hard to figure out a number. Pin me down to a number.

Unidentified Analyst: Let me shorten this, and ask the question a different way. When we first met, or my colleague did, I think you suggested that the market you were addressing were maybe $50 million. That sound right?

Fred Vandenberg: Well I mean, I said $40 million. At least $40 million right now. But that’s – again, that’s I’m probably being hyper. Well, I know I’m being hyper conservative on what that really is. I would say, Play MPE in its ecosystem, if you’re really looking at Play MPE, what it does now is it’s really a.

Unidentified Analyst: I’m not asking. I’m not looking at anything. I don’t know what you’re looking at, I’m asking what, are the size of your markets? You don’t need to explain this or that. What are the size of your markets? Maybe you don’t know. Is that the answer?

Fred Vandenberg: I think, the answer really depends on what market you’re looking at and what – we’re doing right now. Larry, Larry, Larry.

Unidentified Analyst: What you look at?

Fred Vandenberg: Larry, if you let me finish, I will answer your question. Okay. The markets we’re looking at right now, is really solely a distribution market. And you’re looking at $40 million to $50 million for radio promotions itself. You’re looking, you’re probably doubling that for music supervisors and doubling that again for influencers. So you’re looking at $120 million roughly say for just the simple delivery of music. And meter itself, you’re probably looking at twice that as over and, but we have to get there. We have to build out the platform to be able to do those kinds of things. We’re not there right now.

Unidentified Analyst: Where’s the market that you are there right now?

Fred Vandenberg: For meter it’s about say $200 million for Play MPE itself, its $40 million to $60 million.

Unidentified Analyst: So you’re looking at two sizable market perhaps trade involve, right?

Fred Vandenberg: Yes.

Unidentified Analyst: And those markets have grown in the last four or five years or not?

Fred Vandenberg: No, they’ve grown, they’ve evolved, they’ve shifted in terms of their priorities, but they’ve grown, they continue to grow.

Unidentified Analyst: So when are we going to grow, and when are we going to grow profitably? I’m thinking that it’s going on five years that we became, since we first became a shareholder and it’s my fault, slap my wrist, but I thought that in five years you’d be a much larger company top and a significant bottom line. But the case is different, right?

Fred Vandenberg: Yes, I mean, yes, I mean I would have hoped that we would grow faster as well. We continue to make improvements in marketing and the platform, and we showed some growth. We’ve shown roughly 9% growth over the last year and a half, two years. It’s just a little bit slower this quarter.

Unidentified Analyst: But no translation to the bottom line, incidentally what was the $200,000 plus legal expense? What was that for?

Fred Vandenberg: That was for the former CEO. He sued us for dismissal and that was, went to court in December.

Unidentified Analyst: And that all went to lawyers?

Fred Vandenberg: Yes, yes.

Unidentified Analyst: And so, he won the battle and lost the war?

Fred Vandenberg: Well, I don’t know how you could have avoided the war, Larry. The last offer you couldn’t settle. We wanted to settle – and the settlement would have cost us five times as much or ten times as much.

Unidentified Analyst: He didn’t have a leg to stand on. Why would you settle?

Fred Vandenberg: Why would he settle?

Unidentified Analyst: Why would you settle, if he didn’t have a leg to stand on? Maybe I misunderstood. I thought he didn’t have a leg to stand on. And that’s why you were confident about maintaining, having, initiating and continuing the lawsuit. Am I wrong there?

Fred Vandenberg: Well, I think you’re misunderstanding what’s happened, what’s transpired. The case went to court. We’re waiting for judgment right now – that those fees were for litigation. We expect to recover some of those, when we get a positive judgment.

Unidentified Analyst: You get money to enable you to recover?

Fred Vandenberg: Yes.

Unidentified Analyst: Recover some of what you just – what it just cost you?

Fred Vandenberg: That’s right.

Unidentified Analyst: Which the total of all the years?

Fred Vandenberg: Pardon me.

Unidentified Analyst: Were you paying the bill for all these years, or was this the bill for this year?

Fred Vandenberg: What was expensed right in the quarter was just in the quarter. So I mean, there’s more legal fees than that, for sure.

Unidentified Analyst: Well, I don’t know if you’re jogging or running or racing, but get nowhere?

Fred Vandenberg: We’re increasing our cost as we grow our revenue, so we can grow faster. I mean, that’s the whole point of what we’re doing. If we wanted to be a value stock, and not invest for growth, we could do that as well.

Unidentified Analyst: You’re not a stock, you’re a company. You’re running a business. You’re not running the stock market. And what do you call about faster? What is faster? What’s your definition of faster?

Fred Vandenberg: Well, I mean, I expect to grow by more than 25% annually, if we do things properly, but that’s what I’m targeting.

Unidentified Analyst: And why aren’t you doing things properly?

Fred Vandenberg: Well, I’m talking about longer term. I do believe we’re doing things properly. We’re investing as we can to grow faster. We’re a small company. We have limited resources. We just built out the platform for Universal, so they can grow globally. And now, we’re investing in things that, we think will grow our platform organically.

Unidentified Analyst: How much have you spent, on buying in stock in the last five years?

Fred Vandenberg: $800,000 see, I’m guessing a little bit.

Unidentified Analyst: I think you’re probably about right. $800,000 would have been a lot of money to invest in the business rather than the stock. Seems to me it sounds like a mistake. Do you agree or not?

Fred Vandenberg: I mean it’s – I’m not sure that it’s a mistake, no. If you look at expenses you would be buying, you’d be spending on things that are repetitive. So, buying back stock is, I think, something that will pay-off longer term. You’re buying at – a price now that is lower than what you think it will be in the future.

Unidentified Analyst: But the business has grown a lot slower than you had hoped, for it to be in the future. No, yes?

Fred Vandenberg: Well, I would think I would be. Wish things had moved faster. We wish we had.

Unidentified Analyst: Wait a minute, wishes, wishes?

Fred Vandenberg: Well, you asked me what I thought, Larry, so I’m answering what I thought. I thought that things would move faster. I thought we would have moved our development faster, but that didn’t happen. And I think we’re building out the platform, to grow organically and we’re trying our best. And if I think, if we do that well, we – will grow faster.

Unidentified Analyst: How much longer do you think you will need to grow faster?

Fred Vandenberg: Well, like I said, we’re building up the checkout feature, which we’ll release this year, and we think that that’ll have a palpable impact on the revenue growth.

Unidentified Analyst: What is palpable mean?

Fred Vandenberg: You’ll be able to see the difference in the revenue growth. You’ll be able to see an inflection point. That’s what I mean by palpable.

Unidentified Analyst: When do you envision doing this 25% growth that you cited a moment ago?

Fred Vandenberg: Well, I would hope that between 2025 and 2026 we will achieve that. That’s – what we’re targeting. We will have the checkout feature launched, and I think we can acquire new markets.

Unidentified Analyst: Okay. Like they say in church, let us pray. Yes, I’m thinking back to comment. That’s confirming our brains. After three years and a promise you made, which has turned out not to be a promise, you recall that, you don’t have to say what it was if you recall?

Fred Vandenberg: I don’t know what you’re referring to, Larry.

Unidentified Analyst: Well, I was reticent to talk publicly, but at this point, I don’t know that it makes any difference. You said if in three years you didn’t make serious money, you would sell the business, or I think you said you’d sell the business. But look, it’s so obvious that you’ve got this wonderful growth profit, and if you stop developing new products and whatever else you’re doing, you make a lot of money. And since you mentioned the stock so frequently, the stock would be a whole lot higher. And, but it did say in three years and in the fourth year, and we’re going on the fifth year, seems like it’s the same as the first year?

Fred Vandenberg: I think you might be being confused, Larry. I believe that we can grow, and if not, if we don’t have success in that growth, we can ramp down expenses and become a cash generator and do that, and maybe that’s what we’ll do. But I wouldn’t have committed to a timeframe on that.

Unidentified Analyst: Oh, you did. Whether you remember or not, I do. Okay, I got it. It just seems like every year, if you go back and listen to the calls, every one of them is following the same script. You say the same thing and – it depends. But the bottom line is, the way you’ve shown us the revenues, you haven’t even grown at the inflation rate and?

Fred Vandenberg: Our growth has exceeded inflation. But that’s splitting hairs.

Unidentified Analyst: Yes. Okay. Well, I’m disappointed. I hope you are. Yes, well, we’re patient, we’re patient. We’re probably even more patient than your Board. But there’s no, it doesn’t seem obvious that the Board is patient either. Okay. Thank you for your responses. Appreciate it.

Fred Vandenberg: Okay.

Unidentified Analyst: But I will say one more thing. You just talked about huge numbers relative to the size of your market. If you include this market or that market, there you are up above $100 million and you’re doing what, what are you going to do this year, $2 million a quarter or something – $1 million a quarter?

Fred Vandenberg: Yes, we’re a small company, small market share, yes.

Unidentified Analyst: So looking at – what the whole market is, it seems like nothing’s happening. Doesn’t it seem that way to you, what does it?

Fred Vandenberg: I mean, I think it.

Unidentified Analyst: We’re going nowhere fast in terms of share of market?

Fred Vandenberg: Yes, well, we’re…

Unidentified Analyst: Particularly, when was it last year that that firm went out of business, back in business. So we didn’t see any pickup from that?

Fred Vandenberg: Like I said, Larry, they didn’t go out of business. They were announcing that they were going out of business, and then they were acquired so.

Unidentified Analyst: Well, they had a period there, where they weren’t attending to the business, with the same point of view that they presumably had been, the same deal with the same building. No hay was made that happened.

Fred Vandenberg: Okay. Okay. Thanks, Larry. We’re going to grow as fast as we can.

Rebecca Collins: Okay. Thank you for all your questions. It doesn’t look like we have any more today. So yes, looks like we can wrap it up.

Fred Vandenberg: Okay. Thanks everyone. We’ll look forward to the next call. Thanks.