Destiny Media Technologies Q2 2024 Earnings Call Transcript

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April 15, 2024

There are 2 speakers on the call.

Operator

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 with 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.

Operator

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 at 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.

Operator

Also, I would like to mention that following the presentation, there will be a questions and answer 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 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.

Speaker 1

Thanks, Rebecca. Just before we start, today is Rebecca's 5th anniversary with us. She's a key member of our management group. She maintains our list and is 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 good opportunity for me to just give her a shout out and potentially embarrass her a little bit.

Speaker 1

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 was 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 2 quarters of last year and 1st 2 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%.

Speaker 1

It's roughly well, it's a little bit more than 50% of our revenue fairly consistently now. About half of that growth, 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 point 3%. I think what I would say is that's a little bit misleading.

Speaker 1

It includes a one time increase because we had an FX gain last year, foreign exchange gain last year. Depreciation forms about a third of that increase, and it's really kind of doubling up expenditures associated with capitalized software development, 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 the probably the bottom three bullet points on this slide.

Speaker 1

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 the slide very briefly. This is revenue over the last 7 years and just kind of shows you the overall trends.

Speaker 1

You can see more recent quarters were starting to grow a little bit more. 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 to 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, of our release coordination. And that is has been a very long process.

Speaker 1

We transitioned all of our customers, except for our largest, 6 years ago. And since that time, we've invested quite a lot into building out a number of global architecture, 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 a pretty, pretty big step for us.

Speaker 1

Product updates. If I had to go back over the last couple of 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, 5 different ways I've got articulated here. The first is expanding our list The first is expanding our list creation and provision channels.

Speaker 1

Now Play MP 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.

Speaker 1

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 internationalist's presentation.

Speaker 1

So when you have independent record labels, they'll want to send to a broader audience instead of sending just to the 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.

Speaker 1

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.

Speaker 1

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 you 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 help us improve our marketing. This, you see the image here with Dolly Parton's latest album. It's number 1 on our weekly streaming. Now that's on our charting page, which is now also not on a separate website.

Speaker 1

It's in the Play MP website. But now you can really easily select that if it's your, 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 that labels do that. But now with this little addition to the platform, you can share on social media and you would get the Play MP branding. So small change, but it's one of those things that really helps get the Play MP name out there.

Speaker 1

Another thing that we can Play MP product can help in marketing is by 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 product can help market the platform.

Speaker 1

And we can 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.

Speaker 1

Product itself is working on a checkout platform where it doesn't involve staff. And I think that will help us grow at scale, especially when we combine that with things we're doing on the marketing side. The other the 4th thing on this list is new products. Now the one thing that we have talked about recently is MTR, music tracking radar. And that's really just a tool for record labels to see where they're getting their music played.

Speaker 1

The Play MP is the first step in promotion. We distribute the music from Play MP to promotional destinations. And they, you know, they range radio is the easiest one to describe, the most intuitive to understand, but there's a lot of different destinations. And what we can do now is track where it gets played, how often it gets played, what time of day it gets played, all these different things. We launched that in beta in July.

Speaker 1

I'm sure you're all aware of it. Since then, we've been in Canada in July. Since then, we've been Billy note the functionality to grow. Our main thrust during this time was to make sure that the more technically challenging parts of this worked, and they did. So we're very happy with that.

Speaker 1

The more the most challenging things we have no problems with now. And it's really just the sort of the more intuitive parts, the checkout, the payment, all the logical parts of selling a product. And then also we're working on the marketing or growth plan throughout that time. And we'll have more on that in the very near future talk about publicly, but I'll leave it there. So I'm a little bit reticent to share too much at this stage, but you'll see more.

Speaker 1

The last thing on this list is new features. We have a lot of ideas for new features, and they're really things that are going to help be catalysts for sales or potentially, salable items themselves. But we don't have too much to talk about right there. So I'll just leave it. But I wanted to mention it because it is a way product can help grow our revenue.

Speaker 1

So that sort of summarizes what our main priority was a year ago and how it's impacted the business in a short period of time. Entering the year, entering 2024, we identified a number of marketing and business development things to improve. The first thing I think is worth mentioning is that I hired we hired Andrea Mundy, a senior management person. Her profile is on our web page. And she's taken over the marketing group directly and managing the business development group.

Speaker 1

That hire started was done in November, just before Christmas. And she spent a fair amount of time just looking under the hood and identifying some really specific things that needed to be changed. We hired we terminated our web services provider and hired a digital marketing agency. And that's really to focus in on strengthening our web presence in the key markets where we want to grow, coordinating digital ads and SEO, so we can really align the presentation of our websites to strengthen the Plan P brand. You'll see, if you look closely, you'll see that now we've consolidated.

Speaker 1

We always send a player and Castor as part of one site. So that's really the sending and receiving software. Now we have the charting software on that page and now we have MTR on that page. So the tracking that we're just in beta right now. But you'll see that if you go on to Plan P, you'll be able to see you know, the charts where you'd be able to see how you generate this digital image, you know, that where you could where our artists can generate the social media posts.

Speaker 1

But our web presence is really an important way for us to engage with our platform users, whether it's recipients or customers' record labels. And we lacked a lot of clarity on the metrics, and I think we missed some opportunities to optimize for search engines. And the I mean, there's there's quite a lot there's quite a lot of of changes we made in a very, very short period of time here. So it's really not talking a long period, but we've reorganized our marketing managers, clarified their specific goals and roles. We've implemented some processes to for post sale customer engagement, customer retention, little things to do more with existing customers.

Speaker 1

That just shortens your whole sales processing time. That was just launched late last week. And as far as business development goes, it's really just a pretty logical approach to organizing our target markets and developing KPIs at each stage of the customer journey just to improve our processes of customer engagement. So we'll have more on that. There's quite a lot of work to do.

Speaker 1

But having Andrea on board really helps us manage those processes and improve those processes and coordinate with different departments. And hopefully, that wasn't too quickly too quick, but I'll leave it there for questions.

Operator

Thank you, Fred. And thank you for the shout out beginning too. It's been a very fast and fun 5 years. Okay. So we can now begin the question and answer session.

Operator

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're received. If you raise your hand please ensure you've access to a microphone and if you wish to retract your question just click that raise hand icon again to lower your hand. Your camera will remain off but once prompted please unmute your microphone before speaking. If anyone has any questions please raise your hand now. Not seeing any raised hands or Q and A, so maybe we have none for today.

Speaker 1

Okay. I didn't get any on the e mail this morning either. So we'll post the webinar on our website shortly. And if anyone does any questions, they can reach out to me directly too. So I'll leave it there.

Speaker 1

Thanks for attending, everyone.

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