Destiny Media Technologies - Earnings Call - Q4 2025

Transcript

Michelle Perkins-Zalik (Music Distribution Coordinator)

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 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 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 (President and CEO)

Thanks, Michelle. Today we have myself. As Michelle said, I'm the Chief Executive Officer of Destiny, doing business as Plan PE. Along with me, we have Assel, who is our Chief Financial Officer. Assel will be talking about significant components of our financial results. And we have Jen, who leads our strategic accounts. Jen will outline some of the achievements we made in the sales and marketing area. The first thing I wanted to talk to you today about was the modernization of our platform. We undertook a process to move away from the PC application several years ago. The basic features of that were done a few years ago. In the recent past, we've made two significant achievements that have resulted in the retirement of the older platform. The first was we transitioned our client, our largest client, to the online platform.

We did that in April of 2023, so it is a little older now. That transition went flawlessly. Due to the quantum of the data and the historical catalog of the world's largest record label, we maintained redundancy of that platform until this year. Also, internally, we have a very sophisticated list management system, which is essentially the core of what we sell to our customers. We made many upgrades to that system, and we were able to retire that component as well. We were able to achieve cost savings of not maintaining two different platforms. The result of these investments are really the cost savings in three main ways: reduction of platform investments, we also made a lot of upgrades that make the list management maintenance more efficient, plus our client processing systems are more efficient. This is a pretty big deal for us.

The other investment that we announced back in August was the launch of Caster and Caster Plus. Now, essentially, Caster Plus is the old Caster that's the sending side of Plan PE, and Caster now is the self-service component. This investment really helps us in three main ways. It allows us to sell at scale so customers can self-sign up and distribute content without any Plan PE staff involvement. This also allows us to more easily set up trial accounts. This is an important thing to know and even important for our own staff to be aware of. This is really essentially the best way to sell. Our platform is the value proposition of our platform is not an easy one to explain.

The best way to sell it is to get people in it, see how easy it is, see how effective it is, see the information relayed back, and really just become hooked. It becomes an indispensable part of their workflow. Customers in our industry are hesitant for change, but with this, we can get them in the platform and trying it out. Also, it allows us to more easily set up reseller arrangements, whether it's white labeling, OEM, or partnership agreements. There are several label management services companies where they provide more enhanced distribution in a lot of different ways. Plan PE really is regarded as a leader in radio. That reputation helps us in that avenue, and we can partner with those label services companies to effectively increase our channel distribution. Now, with Caster, it's a little bit more easy to achieve that.

We made a lot of improved sales and marketing capabilities. I'll let Jen really touch on those, but it's probably worth mentioning because it's a pretty significant change. Not the last thing, but the profitability. We are a B2B company in a niche business. We have a very strong position in that niche. We've had some success in growing, but it's at a rate of a little less than 10% while we modernize our platform. We have the largest record label as a customer. We've modernized the platform and improved our sales process so we can continue to target revenue growth while reducing costs and improving shareholder value. Meter. In early fiscal 2022, the board of directors wanted to pursue an adjacent business to grow and diversify a revenue base. This led to the launch of Meter last year.

Meter fits into a fast-growing radio tracking and analytics market. We've seen research reports where this market is in excess of $3 billion. We believed that we could target a portion of that as a complementary business opportunity. When we pursued this, we had a targeted approach given our size and cost profile where we only started tracking airplays for customers that would track at a smaller scale, and we started that in the United States so we could get some real market feedback and assess our success. We had validated this need. It was an unmet customer need for our smaller customers, and that is ultimately who forms our customer base right now. This is a relatively low-cost entry into the market, into a very large market, with a short payback period if we achieve certain targets.

When I say low cost, it is really a low cost to the size of the market. The company spent a little less than $600,000 in direct cost in developing Meter, which is a larger expense for a small company, but it was a big opportunity. It is a big opportunity. Since that investment, competitive solutions have emerged, including Apple's free service. Apple's free service does pose a little bit of a drag on our sales, but anybody who is really commercially interested in growing their music presence is probably looking for more details. Certain customers that are really cost-conscious can use this for free. We have not achieved our sales yet, sales targets, and we are operating at a small loss. We do have repeat customers, though, and we are exploring ways to expand our sales approach and target markets.

We're expecting to do ad tracking, an ad tracking trial in early calendar 2026. We're targeting larger volume sales, where this is where you get synergistic sales with Plan PE. Our sales team can target the same customers with two different products. There's also a lot of other value adds with Meter. We are attracting more customers for Plan PE because of Meter. It's not just that we're selling Meter to Plan PE customers. We are selling Plan PE to customers of Meter. We do also have advantages in that we're providing both the distribution services and the tracking, which really provides some interesting and valuable data points. We see insights of how customers are using Plan PE and how that results in their airplay tracking, the numbers. We can provide some really valuable insights to improve their results.

We're just trying to figure out how to monetize that information. It also proves out the value of Plan PE. We've always known that Plan PE was an effective distribution tool, but now we can really draw the line between the distribution and the airplay. Lastly, I want to be clear on this one because I think maybe some comments I've made in the past have not been. We resolved our litigation in October. There was an outstanding claim against the company. The judgment was in our favor, and we were awarded costs. Those costs have not been reflected in the financial statements, but we expect them to be a reasonably large number, and we'll pursue them. With that, I will turn it over to Assel.

Assel Mendesh (CFO)

Thank you, Fred. I will walk you through our financial performance for fiscal year 2025. We'll start from the revenue. Revenue overall was up by 2.3%, and it is 2.6% if we look at the constant currency basis. The major label side was up by $149,000, which is 6.8% for the year, while independent label revenue segment declined by $75,000, which is a 3.4% decline. That decline occurred despite the increase in the number of total Caster customers, which was up by 7.4%, as well as the increase in new customers, which was 11.8%. The total number of releases stayed relatively the same, but what we see is the average spend declined by 10% per customer or 3.2% per release. We believe that there are largely kind of three factors that affected that, first being the general economic conditions, second being the volume discounts we gave early in the year.

Total was approximately $52,000. These discounts were intended to encourage larger sales, but the expected uplift did not materialize. The structure has now been revised for fiscal 2026. The last one is that for the period of time, we had reduced sales stuffing, which has since been addressed. Meter revenue is still less than 1% of total revenue, but it is up by 345% versus last year. The final point to note about revenue is that it is largely denominated in US dollars right now. It is 91.8% in US dollars. Now let's move on to the expenses and overall results. Cost of revenue, as you can see, was up by $76,000, which is 12.5%, mostly Meter-related data hosting and processing fees. The operating expenses increased by approximately $751,000, which is 20%.

Mostly the drivers are, as you can see, amortization, which is non-cash amortization of the software capitalized in the previous years of $364,000. One-time non-repeating litigation-related costs of $249,000, one-time recruitment costs of $28,000, and Meter-related operating expenses of $61,000. As a result, adjusted EBITDA was down by $375,000. Turning to the liquidity, the cash balance was pretty strong, $1.12 million. The slight change versus last year is just the timing of our AR collection that cleared just a couple of days after the year-end. The company continues to operate with no debt or any other material capital expenditure commitments. That was all for the financial results. Now I'll pass to Jennifer to cover the sales and marketing portion of today's call.

Jennifer Rainnie (Head of Strategic Accounts)

Thank you, Assel. I'd like to start off with key marketing achievements for 2025. This included expanding our social media presence, improved digital marketing and site enhancements, as well as customer retention and re-engagement sales outreach. Our new lead tracking has now given us full visibility from lead creation to conversion, identifying affiliate partnerships as the highest source. Our strongest partner provided 392 new accounts, 25 new customers, and our website organic referral traffic provided 1,919 new accounts and 379 new customers. We localized our sites, which launched. We completed three major localized sites: U.S., Canada, and Australia. We've updated our Spanish site, and our Latin America launch is planned post main site updates. SEO and organic traffic exceeded our targets. Organic traffic was up by 46% on a goal of 20%. We had a goal of 10 keywords resulting in a first-page ranking on search, and we've identified 20.

Growth has primarily been driven by brand-aware users. Conversions and sales improvements. Our new account sales are up by 41%. That is 314-443. Our conversion rate has increased by 46% from a 6.5% conversion to 9.5%. Time to purchase has significantly dropped from lead to sale, going from 59 days to 24 days, and from account to sale has gone from 40 days to 24 days. Time between first and second sale on Caster has dropped from 115 days to 39 days. On our partnership channels, we have outperformed with our largest partner delivering exceptional low-cost new accounts and customers with high LTV. Other partners have provided leads but significantly boosted our site referral traffic.

Future-looking, we will continue to expand our social media presence, evaluate our email marketing campaigns, drip flows, and improve lead flow, and we'll focus on supporting our larger customer retention and improve our revenue per purchase. Moving on to our key sales achievements for 2025. Our total revenue was up 2.3%. We saw strong growth from our largest enterprise customer, which lifted total revenue of Majors. Independents have softened due to volume discounts, as previously mentioned, economic factors, and a lower per-customer spend. Customer acquisition and platform growth. We saw growth in new customers in 2025. Our Meter platform is accelerating, and structural corrections are in place to support a stronger 2026. Increased customer engagement.

Our primary focus has been and will be to continue deepening engagement with our major labels through increased personal interaction and relationship building, as well as attendance at key networking events in Canada and the U.S. Strengthening our value proposition. We've developed new sales tools and executed a full communications push around our Caster enhancements, focused on increasing reporting and analytics to strengthen our value proposition. Forward-thinking, we'll be focused on the player-recipient relationship to build traction in underrepresented genres, as well as our core formats: AAA, Americana, Country, Non-Com, and Christian. We're actively looking at complementary music technologies to explore strategic partnerships and potential expansion into adjacent service offerings. That concludes our sales and marketing summary, and I'll pass it over to you, Michelle, to open up for questions.

Michelle Perkins-Zalik (Music Distribution Coordinator)

Thank you, Jennifer. We will now begin the question-and-answer session. If you have a question, please press the raised hand option at the bottom of your screen, and your questions will be pulled in the order that they're received. If you raise your hand, please ensure you have access to your microphone. If you wish to retract your question at any time, please click on the raised hand icon again to lower your hand. Your camera will remain off, but once prompted, please unmute your microphone before asking your question. Our first question today is from Andy Sudiac. Can you advise the plan to increase shareholder value and if there is a plan to return value to investors in some capacity?

Fred Vandenberg (President and CEO)

Thanks, Andy. The board is considering alternatives on how much to invest for growth. Essentially, the issue before us is, do we pursue a value approach even though we're small, or do we continue to invest into product development for growth and diversification? We've already achieved some cost reductions that we've talked about during the call, and I've made some recommendations to the board. I'm just gathering some more information for them for their consideration. As far as returning that capital to the shareholders, there are a couple of different ways to do that, and we're going to pursue the most efficient, whether tax-efficient or efficient for our shareholders as possible.

Michelle Perkins-Zalik (Music Distribution Coordinator)

We have another question from Andy. What percentage of the market does Plan PE feel they currently have?

Fred Vandenberg (President and CEO)

I mean, that's a little bit of a challenge to figure out. I think it's probably still between 5% and 10%. We are targeting growth, and I think with the recently launched Caster and Caster Plus, we can more easily integrate with the partners that we spoke about. Essentially, that can act as resellers. We're really regarded as the market leader when it comes to radio. That reputation kind of hurts us and helps us. It helps us essentially in the industry. It maybe hurts us in the sense that we're perceived as being more of a niche than we really are, but I think we can still grow quite a bit. We've made some improvements with the sales and marketing team, and we can grow from there. Sell what we have.

Michelle Perkins-Zalik (Music Distribution Coordinator)

Our next question is from Thomas. Thomas, you can go ahead and unmute your mic.

Hello. Hi.

Fred Vandenberg (President and CEO)

Hi. Hi, Thomas.

Hi. First of all, I just want to say thanks for bringing in Jennifer and Assel. I think it's bringing more color, and it's pretty appreciated. The first question is on the litigation cost. I'm not sure how much you can disclose or tell, but should we assume that total cost of last couple of years could be recouped? Is that how it works normally, or?

It works. It's a little bit complicated. Essentially, the way it works is you get an award of cost, and if it's your lowest award, you get probably 25% of your cost back. I don't think that there's a number of things that go into it, but essentially, that would be our worst-case scenario, and I think that we're very much likely not to be in there. There are double costs in certain circumstances, which brings it up to 50%, and then there are special costs. Essentially, those kick in at certain times. Based on certain events, it gets kind of complicated, but we expect a reasonably healthy award.

Okay. Without being too specific, is it like a one-time payment, or do you guys have to kind of agree with the payer on a schedule, or is it like a one-time payment?

I do know it's not quite as easy as that. First is you define what the award is based on a schedule. So we have yet to do that. Then we set a schedule with the claimant.

Okay. Do we have a sense of the timing approximately, or is it like a couple of months, a couple of years, or I don't know?

I don't know. I can't answer that question.

Okay. I think it was last call you talked about having a consultant reviewing the business holistically.

Yeah.

Do you have any—did he present his findings or whatever, or?

Yeah. He presented his findings. There was not anything revelatory in the report, I would say. It really just highlights that we're taking on, I think, the right approach to our growth strategy, and we're pretty strong in our position in the market, and we can grow from there.

Okay. Now that self-serve is available, is the goal to kind of also run ads locally at multiple places in the planet, or what's the strategy behind figuring out which market to kind of?

Yeah. I mean, essentially, that's right. We have different markets where self-serve checkout can be used. We're very strong in that market, but they're generally small, so it's kind of difficult for us to scale in those markets when we are using our staff. That's one area where we would be using self-serve checkout. It's probably worth me reiterating what I said earlier about the building of it. The building of self-serve checkout, which we call Caster now, helps us in that what you just asked me about, the selling within a local territory, and people can help themselves and come in, sign up, checkout, and purchase from that way. We can do that very efficiently and profitably now. It also helps us provide trial accounts. We can provide trial accounts to larger strategic customers, and we're doing that as we speak.

We can do that now because essentially we restrict the trial use to a particular area. Before, we could not do that. There are also savings in terms of our own staffing and client processing that is maybe hidden from the top line. It reduces our burden, overhead burden.

All right. Thank you. I'm not sure if there are two people in line, but I have a couple more. Why did the current—not the current, but the denomination of revenue was mostly US. Wasn't it like half and half almost with Euro before? What changed or?

That's our largest customer moving from Euro to.

Okay.Okay. Okay.

There is nothing other than that. Okay.

One more question I am just trying to figure out. Should we expect any more hires in the coming months, or?

No. I think we're staffed up sufficiently.

Okay. Just to voice back on the first question from Andy, I guess I would like, as a shareholder, to see buybacks. I think with the current share price, I think there could be meaningful value created with not much dollars.

Okay.

Yeah. I mean, it's just my opinion.

Noted. I mean, it's a good strategy for that, for sure. Yeah.

I mean, yeah, I guess you could retire another, what, 5% on—I mean, there's not much step in the market, but still.

Yeah. With the TSX trading, that's the rate-limiting step on our buyback at 5%. Yeah, we can do that.

Is there additional cost to do a substantial issue or bid, or at least try, or? I don't know even if they're just admin costs related to those, or.

I don't believe so, but I still think we're limited potentially by the TSX. That is one thing I will look into.

Okay. Thank you. All right. Yeah. I mean, I guess another point as a shareholder I would like to see is seeing more insider purchases on the market, at least from the board. I think it has not been—it has been a while since I have seen some. I know a couple of them are probably maxed out, but a couple of them I have not seen probably any buys, or I mean, just me voicing an opinion.

You did see me buy.

Yours. Yeah. I've seen yours.

I bought in.

August.

Yeah. In August. You saw that. Okay. That was not in the ESPP, so I mean, I know it's a—anyway. Yeah. Okay.

I mean, you don't have to answer anything. I'm just voicing.

Yeah. No, I see.

Something I think a couple of people probably would like to see as well. I know I have mentioned it last time, but I still have not seen the replays from Q2 and Q3 on the website. I mean, this time I just took screenshots, but I kind of like to see the slides. To circle back, I mean, just if you ever have time.

Yeah. I'll check on that.

That's it for me. Thank you very much.

Okay. Thanks, Thomas.

Michelle Perkins-Zalik (Music Distribution Coordinator)

Thank you. That concludes all the questions for today. Thank you very much, everyone.

Fred Vandenberg (President and CEO)

Thanks, everyone.