Destiny Media Technologies Inc.

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 news wires 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 FEC and CEEDAR, 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 CEDAR. 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 the following 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.

Thanks, Michelle, and thanks to everyone for joining the call. I wanted to talk about a few main things before I hand it over to Asel and Jen for a little bit more detail on the finances and our marketing and sales strategies. The first is the universal agreement that shortly after we had the call last quarter or at the year end, we came to terms with universal on a longer term agreement that has been in the works for a reasonably long time. The core challenge was really aligning the priorities of multiple stakeholders and Finance, which is under pressure to reduce costs, and the operation promotion teams who are really focused on maintaining the effectiveness and the reach of the platform, as well as senior decision makers above them. Navigating these competing mandates really required a lot of stick handling, but the result is an agreement that we think works across all interests. It provides Plan B a long-term anchor client that underpins the platform itself, provides revenue, stability, and opportunities for growth within Universal and future growth initiatives that really strengthens the company's platform and growth trajectory. This agreement really supports both of us for a longer term and expanding and working through as a partnership going forward. And we're really excited about it. I'll go through some of the terms. First, the fees. Ultimately, the structure of the agreement has changed such that the fees now cover use of the existing platform but excludes any development that they require. And then what we will do is really provide a justification, an ROI internally for them if there is any new development that they desire. And then fees for that will be separately negotiated later. The base fee is $1.6 million annually for the first year with inflation indexes for years two and three. That base fee is 5% lower than the 2023 fees that we had, and this really is a recognition of a longer-term agreement eliminating inflation. the short-term premiums that we had and the cost savings from a reduction in the development requirements for them. We expect that the 2026 revenue will be adversely impacted by about 6.5%. This includes a development fee that we've already negotiated on top of the $1.6 million. And we're going through their wish list, so it's currently unknown if we will be able to add any new development fees for them. To make up this difference, we would need to increase independent label revenue by about 14%. And I'll talk about that shortly, what we're doing on the independent front. I think it's worth going through a few more of the terms. As I alluded to above, it's a three-year agreement. We've never had a three-year agreement before. We've been in business with Universal for years. about 20 years now. So, you know, it's a long-standing relationship. But this three-year agreement is the longest agreement we've had and it really provides the runway to work as a partner with them. The index we have for inflation is there's a 2% increase in 2027 and 2028 on top of that. Again, we've never had an inflation index. We've always, when we've come to terms, we've always been looking back at a fee that has never indexed for inflation during the years. And so this represents a fairly significant shift in the mentality, you know, recognizing that our costs do rise over time. It also excludes any labels for which UMG does not have a distribution agreement or is currently not owned by UMG. So, in the event that they expand their distribution services or expand by acquiring new labels, we can negotiate new fees for that. And It's not articulated in the agreement, but we've had some really productive conversations. The main contact that I've been negotiating with has returned to digital distribution, and she's a really tough negotiator, obviously, but she's very pragmatic and... she recognizes that where we save them money, whether it's efficiencies that we can work on or we displace competing platforms, that will help us negotiate in the future. So it's an agreement that we're really excited about. Moving on to independent labels, we've been working on a number of things that have started to come together in timing. We mentioned last quarter about the modernization of the platform. That has really two main things that we moved Universal over to the online, the web platform and retired the old PC applications. But we also introduced Castor and Castor Plus. Now, Castor Plus is what we used to brand as Castor, so it can be a little bit confusing there, but Castor is now a fully self-serve platform for labels to sign up and send out content themselves. We have noticed a significant increase in the conversion of leads and I can talk about marketing in a second but with that we've noticed we've transitioned people during the quarter to allow them to have the choice between caster and caster plus we have noticed that there are it's a high degree of what I would say a poor quality of distribution. So we have some work ahead of us in terms of training our customers on the platform and or making it a little bit easier to use so that we can fully scale, so we can fully leverage that. But essentially we're allowing our customers to, we're making significant headway in allowing our customers to scale client-led distributions. Last year, we talked a lot about our marketing efforts. That was really focused in on a few different things. SEO improvements, the website improvements, so that we hit more leads, we generate more leads. We've tracked those leads to identify which customers we really want to focus in on, which has really helped over the course of the last 12 months allocate resources internally on things that we think are going to help us more. We've recently began investing a little bit more in social media. We've had a 10% increase in followers. We've improved our digital advertising, and we've expanded our automated outreach to certain clients. And Jen will expand a little bit more on that. And then also, the last thing we did here is increased pricing in certain areas. area where we, it's not really an increase in pricing, it's just that we eliminated volume discounts that we enacted last year that were designed to expand the volume of distributions or grow the average size of a distribution. That really didn't have an effect. We've noticed that Customers that are trying to do global distributions through PlanP aren't that price sensitive. It doesn't help to provide discounts. So we removed those, and we also increased our catalog pricing. The upshot of all these things is that... that we had almost a 24% increase in lead generation. And those leads are really better qualified leads. We've had a 7.3% increase in caster customers, which is pushed by a 27% increase in new caster customers. And during the quarter, that represented almost a 3% increase in independent label revenue. Some of those changes really took effect later in the quarter. So you'll see a bump in November revenue of about 15.5%. That really is starting to... flow into Q2 as well. We've seen a very strong December result so far. And lastly, we saw MTR revenue go up by 30.5%. Now, MTR is still quite low, and we're working on some things that we think will expand MTR's presence. We are going to be reporting, MTR is tracking, just so for anybody who doesn't know, MTR is tracking the actual airplay of a song that goes through Plan B. We are incorporating the reporting of that into Castor, which I think just makes MTR more visible and And then shortly after that, we're going to make it so you can buy MTR directly within Castor. That's really changing our focus on product development into a narrow focus on things that are really going to directly impact Plan B revenue. And with that – oh, sorry, cost reductions. Because of the things we've done over the last year, we've really been able to reduce our costs. During the quarter, we realized a total cost reduction of 1.3%. That includes all costs, cash, non-cash, and capitalized costs. So it doesn't translate neatly into the financial statements, but it essentially is all of our costs. Salary and wages, these are costs that we've realized during the quarter, so 8.2% reduction. Had we undertaken all of these cost reductions at the beginning of the quarter, they would have translated into a 7.7% reduction in total spending. with 14.8% on salaries and wages. With those efficiencies that we've gained and the modernization of the platform, We can further reduce our spending. We think it's about 16% that we can comfortably reduce if we want to maintain our revenue growth, but just reduce our investing in product development and taking advantage of some of these efficiencies. And with that, I will turn it over to Asselt.

Thank you, Fred. I will now walk you through our financial performance for the quarter, and I'll start from revenue. Revenue for the quarter increased by 1.3%, and if foreign currency adjusted, it's actually 1.6%. The major labels are very materially decreased by $1.5,000, and independent labels increased by 2.5%. And That was a combination of several factors, as Fred mentioned. Increase in independent customers, it's 7.3% in the quarter, and again, most of the increase came in November, as Fred mentioned. Total releases, total purchases increased by 3.7%. Average spend declined by 2.4% per customer. However, this is mostly from our new customer acquired, where we see new customers spending less, and while we see older customers spending more. So we believe that as these customers, new customers return, once they see the success using our platform effectiveness and leveraging our automated marketing campaigns and sales outreach, that we'll have a chance to move those customers into a greater sense. And the last one was pricing changes. As Fred mentioned, we reduced volume discounts that we had enacted in the prior year to induce larger distributions We found that these were not working as large international distributions and not really that price sensitive. And we also increased our price for the annual year-end catalog distribution. So that was for independent labels. And the meter is still less than 1%, very close to 1, of the total revenue, but it keeps growing. So the increase was around 30%. And the revenue continues to be mostly US dollar denominated, 94.5% this quarter. And next one, so let's move to the overall results. Thank you. As you can see from the table, the adjusted EBITDA for the quarter was 262.5 thousand, which is a slight decrease from paper of less than 35,000. However, This decline is mostly just a capitalizable activity during the quarter. So this quarter, we only capitalized a pretty small amount of less than $30,000. And turning to liquidity, the cash balance increased significantly, as you can see, by $244,500, 22%. And it's mostly, as Fred mentioned, driven by the several cost reduction initiatives we had during the quarter, which translated into higher operating cash flow. And the last point, the company continues to operate with no debt and no material capital expenditure commitments. So with that, I'll pass to Jennifer to cover sales and marketing portion of today's call. Thank you, Asel.