Destiny Media Technologies Q1 Earnings Call Highlights

Destiny Media Technologies (OTCMKTS:DSNY) used its latest earnings webinar to outline a newly signed long-term agreement with Universal, discuss early signs of improving independent-label revenue, and detail cost-reduction efforts that management said are expanding cash generation and supporting profitability.

Universal agreement shifts economics and adds longer runway

Chief Executive Officer Fred Vandenberg said that shortly after the prior quarter’s call, the company “came to terms with Universal on a longer-term agreement” following an extended negotiation process that required aligning priorities across multiple Universal stakeholders. Vandenberg characterized the result as a deal that provides Play MPE with “a long-term anchor client,” improves revenue stability, and creates “opportunities for growth within Universal and future growth initiatives.”

Under the revised structure, Universal’s fees cover use of the existing platform but exclude development work. Vandenberg said future development would be justified internally at Universal and negotiated separately with Destiny Media.

• Term: Three years, which management said is the longest agreement the company has had with Universal in about 20 years of doing business together.
• Base fee: $1.6 million annually for the first year, with inflation indexing in years two and three.
• Inflation indexing: A 2% increase in 2027 and 2028, which management said is a change from past agreements that were not indexed for inflation.
• Scope: Excludes labels not owned by Universal Music Group or where UMG does not have a distribution agreement; new fees could be negotiated if Universal expands distribution services or acquires additional labels.

Vandenberg said the $1.6 million base is about 5% lower than 2023 fees and reflects both a longer-term agreement and reduced development requirements. He also said the company expects fiscal 2026 revenue to be “adversely impacted by about 6.5%,” and noted this estimate includes a $35,000 development fee already negotiated in addition to the base fee. Management said additional development fees are possible but not yet known.

To offset the expected impact from the Universal restructuring, Vandenberg said independent-label revenue would need to rise by about 14%, and he pointed to recent independent growth initiatives as a key focus.

Independent-label efforts: platform changes, marketing, and pricing

Management highlighted multiple initiatives intended to increase lead generation, improve conversion, and raise average order value among independent labels. Vandenberg said the company modernized the platform, moved Universal to a web-based experience, retired older PC applications, and introduced Caster and Caster Plus.

Vandenberg described Caster as a fully self-serve option for labels to sign up and send content themselves, while noting some customers have shown “a poor quality of distribution” and that the company has work ahead to improve training and usability to scale client-led distributions.

On marketing, management cited efforts spanning SEO, improved lead qualification, social media investment, digital advertising, and expanded automated outreach. Vandenberg said the company also adjusted pricing by eliminating volume discounts introduced last year—discounts that management said did not meaningfully change customer behavior because larger global distributions were “not that price sensitive.” The company also increased catalog pricing.

Vandenberg said these actions contributed to:

• Nearly 24% growth in lead generation, which he said were “better qualified leads.”
• 7.3% increase in Caster customers, driven by a 27% increase in new Caster customers.
• ~3% increase in independent-label revenue during the quarter, with many changes taking effect later in the period.
• ~15.5% increase in November revenue, which management said was carrying into Q2, alongside “a very strong December result so far.”

MTR revenue grows, with plans to increase visibility and purchasing

Vandenberg also discussed growth in MTR, which he described as tracking the actual airplay of a song distributed through Play MPE. He said MTR revenue rose 30.5% and that the product remains relatively small, while the company works on initiatives to expand adoption.

In the Q&A, management reiterated that MTR is “a little bit less than 1% of revenue” and said planned steps include incorporating MTR reporting into Caster to make it more visible, enabling customers to buy MTR directly inside Caster, and conducting an ad-tracking test while exploring broader global and higher-volume tracking.

Quarterly financial results: modest revenue growth, cash up, no debt

Chief Financial Officer Asel (last name not provided in the transcript) reported that quarterly revenue increased 1.3%, or 1.6% on a foreign-currency-adjusted basis. She said major-label revenue decreased by $1,500, while independent labels increased 2.5%.

Asel attributed the independent performance to a mix of factors, including a 7.3% increase in independent customers during the quarter and a 3.7% increase in total purchases. Average spend per customer declined 2.4%, which she said was largely due to new customers spending less than established customers; management said it expects an opportunity to grow spend as new customers return and use the platform more.

Adjusted EBITDA for the quarter was $252,500, which Asel described as a slight decrease of less than $35,000, primarily due to reduced capitalized activity (less than $30,000 capitalized in the quarter). She also said the company’s cash balance increased $244,500 (22%), driven by cost reduction initiatives translating into higher operating cash flow. Management noted the company has no debt and no material capital expenditure commitments.

Cost reductions and capital allocation questions

Vandenberg said the company realized a 1.3% total cost reduction during the quarter (including cash, non-cash, and capitalized costs). He also said salary and wages were reduced 8.2% during the quarter. On a run-rate basis, if reductions had been in place for the entire quarter, management said it would have translated to a 7.7% reduction in total spending and 14.8% in salary and wages.

In the Q&A, Vandenberg said those savings should be fully reflected in fiscal Q2. He also said additional reductions are being considered, describing roughly 16% in further potential spending reduction “on top of the 7%,” though he said those additional changes had not yet been implemented.

On capital allocation, Vandenberg said the company’s cash is invested conservatively and that management is weighing whether to maximize cash flow or continue investing to accelerate revenue growth. He said the company could consider acquisitions and is “looking at” opportunities, while also discussing the possibility of dividends or a buyback in the future, noting there are considerations related to mechanics and taxation given the company’s structure.

Management also addressed investor questions about segment reporting, noting the company publicly discusses revenue primarily by customer type (independent vs. major labels), geography, and format, with MTR now an additional product category. On litigation, Vandenberg said the company won and expects an award of costs that has not yet been established; he also noted an opposing party filed a notice of intention to appeal, though he said he did not believe an appeal would ultimately proceed.

About Destiny Media Technologies (OTCMKTS:DSNY)

Destiny Media Technologies Inc develops technologies that enable the distribution of digital media files in a streaming or digital download format over the Internet. It offers Play MPE, an online platform that distributes promotional content, including broadcast quality audio, video, images, promotional information, and other digital content from record labels and artists to broadcasting professionals, music curators, and music reviewers to discover, download, broadcast, and review the content; Play MPE CASTER; Play MPE Quickshare provides a distribution tool for Play MPE customers to promote music; and Play MPE Player for music curators to review and download content through cloud-based player and mobile apps.