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DESTINY MEDIA TECHNOLOGIES INC (DSNY)·Q1 2020 Earnings Summary

Executive Summary

  • Q1 2020 revenue rose to $1.05M (+6.3% reported; +8.5% currency-adjusted) while net income declined to $0.11M as operating expenses increased 22% to fund product and business development; EPS was $0.01 vs $0.02 YoY .
  • Management highlighted 12th straight quarter of revenue growth, driven by independents worldwide (+11% FX-adjusted) and organic use in existing territories; remained cash flow positive despite higher spend .
  • Destiny repurchased 512,555 shares (~4.7% of August 31, 2019 shares) for $490,500; average price around $0.96, with capacity under NCIB to buy up to ~5% within the year, supporting share count reduction and potential floor to valuation .
  • Near-term catalysts: new player release with passwordless authentication, localized sender tools (German, Japanese, Spanish, French) to accelerate territory acquisition; management expects at least one new market addition in the short term .

What Went Well and What Went Wrong

What Went Well

  • 12th consecutive quarter of revenue growth; FX-adjusted revenues increased 8.5% and reported growth was 6.3%, with independents worldwide up 11% FX-adjusted .
  • Product velocity improved: launched a new player including single-click email authentication and expanded sender-side language localization, positioning Play MPE ahead of competitors in user experience; client feedback included “you should be really proud of this” and “I love this… way faster” .
  • Remained cash flow positive despite higher investments; business development staffing expanded through 2019 to target new markets with confidence in adding territories .

What Went Wrong

  • Operating expenses rose 22%, compressing operating income to $0.11M from $0.21M YoY and EPS to $0.01 from $0.02; the spend increase is intentional but weighs on near-term profitability .
  • FX headwinds reduced the positive revenue impact, lowering growth from 8.5% FX-adjusted to 6.3% reported .
  • Customer acquisition costs elevated as Destiny seeks to displace entrenched competitors in new markets; sales cycles are longer and require sustained product and BD execution .

Financial Results

Income Statement Comparison (YoY)

Metric (USD)Q1 2019Q1 2020
Revenue ($)$984,019 $1,045,856
Gross Margin ($)$907,849 $960,574
Total Operating Expenses ($)$694,093 $855,305
Income from Operations ($)$213,756 $105,269
Net Income ($)$220,190 $111,658
Diluted EPS ($)$0.02 $0.01
Weighted Avg Shares11,002,786 10,954,603

Balance Sheet Snapshot

Metric (USD)Aug 31, 2019Nov 30, 2019
Cash and Cash Equivalents ($)$2,512,138 $1,545,080
Short-term Investments ($)$380,056 $1,138,375
Total Current Assets ($)$3,315,772 $3,181,618
Total Liabilities ($)$506,083 $1,097,731
Stockholders’ Equity ($)$3,129,007 $2,968,264

KPIs and Operating Metrics

KPIQ1 2020Notes
Reported Revenue Growth YoY (%)+6.3% FX-adjusted +8.5%
Independents Revenue Growth (FX-adjusted) (%)+10.9% Core driver in US/Canada
Shares Repurchased512,555 To Jan 8, 2020; ~4.7% of shares
Buyback Average Price~$0.96 CEO remark
Canada Revenue ($)~$15,000 Immaterial; customer location basis
Cash + Short-term Investments ($)~$2.68M Reclassified from cash to ST investments

Comparison vs Estimates

MetricConsensusActualSurprise
Revenue ($)N/A (Consensus unavailable via S&P Global at time of analysis)$1,045,856 N/A
EPS ($)N/A (Consensus unavailable via S&P Global at time of analysis)$0.01 N/A

Note: Wall Street consensus via S&P Global was unavailable at the time of analysis due to retrieval limits; no estimate comparison provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
New Market AcquisitionNear-term (Q2 2020)None disclosedExpects to add at least one market within the quarter Initiated qualitative guidance
Operating ExpensesOngoingNone disclosedContinued elevated spend (+22% in Q1) to accelerate product and BD Increase maintained
Share RepurchaseFY 2020 NCIBAnnounced Sept 2019 NCIB up to ~5%Active: 512,555 shares bought by Jan 8; limit ~550,140 shares (5%) Maintained; ongoing execution
Cash ManagementOngoingNone disclosedFunds reclassified to short-term investments; cash + ST investments ~$2.7M Operational clarification

No formal quantitative guidance (revenue, margins, tax rate, OI&E, dividends) was issued in Q1 2020 materials; management emphasized product cadence and market expansion initiatives .

Earnings Call Themes & Trends

TopicQ3 2019 (Prev-2)Q4 2019 (Prev-1)Q1 2020 (Current)Trend
Product EnhancementsAdded mobile player apps; BDS integration; CRM dashboards to improve monitoring Vision to expand Play MPE into collaboration/data services; rebuilt product team New player with passwordless auth; sender-side language localization; faster cadence Accelerating cadence and UX leadership
Business Dev & StaffingAdded PM, support, inside sales; recruiting BD/dev roles Headcount +50% YoY; doubled BD/marketing; improved relationships with majors Increased BD staffing; pursuing entrenched competitor displacement; higher CAC Scaling go-to-market; longer sales cycles
Major Label RelationshipsWarner Baltics added; trials with Sony UK; US independents +10% UMG use broadened in US; Warner 11 countries, Sony 5; 80+ countries active Independents worldwide +11% FX-adjusted; US/Canada independents growth Network deepening across labels
Territory ExpansionCanada seeding; South Africa training; Scandinavia volatility (GDPR impact) Europe +8.5% FY; pursuing UK/South Africa; language localizations planned Expect at least one new market in short term; Toronto prospect feedback strong Momentum building to add markets
Capital Allocation (Buyback)Not yet activeAnnounced reverse split; NCIB up to ~5%; cash ~$2.9M 512,555 shares repurchased; avg price ~$0.96; daily/period limits constrain volumes Ongoing share count reduction
Regulatory/LegalLawsuit with former CEO scheduled for trial Apr; immaterial to near-term ops N/AN/AStable backdrop
FX/MacroFX adverse impact noted (Europe/Scandinavia); GDPR list reduction impact FY19 FX-adjusted growth +9.1%; FX headwinds on EUR/AUD FX reduces reported growth from +8.5% to +6.3% Persistent FX headwinds

Management Commentary

  • “Revenue again is up for the 12th straight quarter… we’ve remained cash flow positive.”
  • “Our FX-adjusted revenue grew in all territories… independents worldwide grew by 11%.”
  • Client reactions to the updated hub: “you should be really proud of this” and “oh my God, I love this… way faster” versus a competitor .
  • “We released a new player… authentication feature where now a recipient can click on an email and get logged into the system… no lack of security… puts us ahead of other competitors.”
  • “New investments are expected to increase product enhancements and new market acquisition in the short term.”

Q&A Highlights

  • Share count and buyback: Weighted average shares will decline further in Q2; NCIB allows up to 5% per fiscal year; average repurchase price around $0.96 .
  • Market addition timing: Management expects at least one market addition within the current quarter; multiple irons in the fire (Canada, Latin genres) .
  • Cash vs investments: Reduction in “cash” driven by reclassification into short-term investments; liquidity ~ $2.7M remains intact .
  • Canada revenue: ~$15K in the quarter; geographic segmenting based on customer location rather than destination .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q1 2020 was unavailable at the time of analysis due to retrieval limits; therefore, no beat/miss analysis versus Wall Street consensus is provided. Future estimate comparisons should anchor on S&P Global consensus when accessible.

Key Takeaways for Investors

  • Sustained top-line momentum (+6.3% reported; +8.5% FX-adjusted) continues, but near-term profitability is pressured by intentional 22% OpEx increases to drive product/market expansion .
  • Product upgrades (passwordless authentication, sender localization) and improved UX are clear differentiators that can catalyze territory wins and displace entrenched competitors over the next 1–2 quarters .
  • Buyback activity (~4.7% of shares since September start) tightens float and may support the stock into execution milestones; management suggests further share count reductions within NCIB constraints .
  • Independents are the growth engine (+11% FX-adjusted), with organic adoption in existing territories; broadened relationships with majors (notably UMG) improve network effects in the US and Europe .
  • FX remains a headwind, dampening reported growth; investors should monitor mix shift and geographic expansion as localization efforts ramp .
  • Near-term trading implication: watch for press releases on product deployments and market additions; confirmation of new territory wins and sustained KPI cadence could be stock-moving events .
  • Medium-term thesis: expanding Play MPE from delivery into a collaboration/data hub can unlock new monetization on both sides of the marketplace, with operating leverage once BD investments normalize .