Destiny Media Technologies Inc. (OTC:DSNY) Q4 2022 Earnings Call Transcript

Destiny Media Technologies Inc. (OTC:DSNY) Q4 2022 Earnings Call Transcript November 15, 2022

Operator: Hi, everyone and thank you for joining us. So if I get set up, I will just kick everything off. And 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 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. With that, I would like to turn the call over to your host, Fred Vandenberg, Chief Executive Officer.

Fred Vandenberg: Thanks, Rebecca. Good afternoon, everybody. Today, we have myself, Fred Vandenberg, and Allan Benedict, who leads our business development and marketing teams here. I’d like to take you briefly through our financial results. There is a few things of interest, but that will be brief. Then we will talk about business development activities. I will touch on product development. I’ll start it off and then Allan will continue on and he will continue on through the marketing and the new business initiatives, sales activities. And then I will come back and talk about things looking forward. The financial results, so to start off, we had revenue declined by 3% this year. And this is really a function of the declining value of the euro relative to the U.S. dollar, whether it’s caused by the war in Ukraine or other factors, it’s really the single biggest impact to our revenue this year.

It’s really hidden some positive signs. We had a renewal with Universal that took effect in the third quarter with a 10% increase. We have had some positive increases in revenue in Canada and some really encouraging signs of €“ with Warner internationally and specifically in the United States. Allan will talk through those in a bit more detail. EBITDA is just over $400,000. The graph here just shows our revenue quarter-over-quarter and our EBITDA quarter-over-quarter for the last 8 years. I think it is €“ that disclose just shows you a little bit of a trend. The EBITDA numbers are listed on the right hand side of that graph and it’s really just a function of €“ so I can show them on the same graph. Expenditures fell by 5%, that’s the P&L expenditures.

We have expanded our product development and engineering teams, but we have capitalized those expenditures because we view those €“ the things that they are working on have a long-term incremental value to Play MPE. So that’s €“ if you look at the expenditures that are on the P&L and then capitalized, they have gone up by 15%. And that’s really to €“ so we can more aggressively pursue revenue opportunities that we see. Before I start talking about the €“ what we did this year in terms of product development, I just wanted to take a little bit of a high level view of the platform itself. First, we have the €“ there is four main components: the initial release distribution tool, the player side, recipient side software that receives the content.

It’s €“ we have a library of music and archive that stays there. So, it’s a little bit different than simple distribution tools. Then we have our curated list. Now this is something that Allan will go into a little bit €“ in a little bit more detail later in the presentation. But this is really a significant component of what we do. And then the last thing is the global release €“ the global architecture. Now when we talk about these things, when I talk about these things, I am somewhat imprecise with certain things because these components don’t necessarily fit into unique categories like there might be aspects in context. For example, there are aspects in context, for example, that really help in global multi-country management of our leases, but they are also in the local distribution tool.

And this is all described in the 10-K with a little bit more detail. But I really wanted to focus in on what we did this year because I think it’s significant. So, starting off with product development, we launched the global architecture in the browser-based platform. Now I use the word launched here because it’s easy to say, I catch myself saying it’s complete, but it’s never complete. You are always going to maintain that software. It’s €“ you build a building, then you have to maintain it. I mean that’s probably a poor metaphor, but we’ve launched this global architecture. We have also done a lot of work on our list curation. Allan again, will talk more about that. And then we have expanded our product and design and development to €“ and been able to use the resources that were in the global architecture to move into new products.

So just I wanted to touch on the global architecture a little bit. When you do €“ when you have a global distribution, there are just an absolute ton of features that live in that architecture that help facilitate efficiencies, economies of scale and provide competitive advantages. Now I will give you an example of one, we call it release sharing. But essentially, within Caster, so within the now launched web €“ browser-based global infrastructure, Caster is integrated with Universal’s archival system. So what happens is when they prepare a release that release is automatically populated with all the release data, the song, the track names, the album, cover art, ISRC codes, publisher information, all these different pieces of data. And so what happens is the distribution hubs at Universal then share that release amongst the territories around the globe.

And that €“ so that information doesn’t have to be reentered and those €“ that’s done thousands of times €“ thousands of thousands of times a year, so calculating the cost savings to Universal is it’s somewhat arbitrary or an estimate, but it’s significant. But it also has a real positive impact on revenue. What we have seen and Allan also will touch on this a little bit, but what we have seen is that when ISRC codes, this is a code that tracks each song specifically and is used for royalty remittance and things like that. But that ISRC code, when it’s transmitted, it actually improves your engagement with the release. And so not only is this data conveyed more easily and more efficiently and saves a ton of time but on the other side of it, it has a positive impact on revenue.

Anyway, that’s me starting to get down into the weeds of why this global infrastructure is really beneficial and provides universal with some real big competitive advantages. But the real important factor here is that that we’ve launched this architecture in the browser-based platform and that’s a real big thing for the company. And with that, I will turn it over to Allan to talk about our recipient lists.

Allan Benedict: Thank you, Fred. Good afternoon, everyone. As Fred alluded to earlier, a critical component of what we sell is the ability for our clients to utilize our own managed recipient lists. In most cases, these lists are acquired. Our customers either do not know who to send you or challenges in maintaining the same quality of their own list. By quality here, we mean lists that are complete, current and accurate, so filled with the right people on the right list being delivered the right content for their use. Play MPE has several proprietary processes that help us keep these lists current, which is extremely important given the nature of the music industry. Typically, we see roughly 30% to 35% turnover of recipients due to things like job changes, role changes, routine layoffs at radio, consolidation, etcetera.

And without our constant updates, recipients would become stale rather quickly. We also see that our recipient lists are significantly more active and, therefore, provide much greater value than any one client’s individual lists. And that’s the case not only for our independent customers, but also all the way up to some of our largest clients. This is a very significant value that Play MPE uniquely provides. This past year, just over 74% of all releases to Play MPE included at least one of our own managed lists. And that’s the more list we create and the more active recipients on those lists, the more we’re able to sell those. Active users on our list grew by 11% overall in fiscal 2022. And when it comes to recipients and recipient engagement in the latter half of fiscal 2022, we started a couple of processes that will increase our ability to provide more lists.

First, as we saw from our entry into Canada, our sales were initially to Canadian labels, but with an international target. These were labels that wanted to utilize Play MPE, not just to distribute it in Canada, but to take their releases on a global scale if it’s in the U.S. or some of the other territories that we service. As such, in the latter part of the year, we began to examine the structure of our lists hoping to adapt them to this growing international market and the global reach of the music industry. We worked on bundling lists for specific genres of music such as country or rock, bundling them together to create an international genre offering. These international bundles launched commercially at the end of the fiscal year. This is really leveraging existing users on Play MPE list, but providing an option that should increase the average sale per release.

We also began working on some processes to increase the number of current Play MPE users on our list. Right now, the majority of recipients within the Play MPE ecosystem are not curated and placed on a Play MPE list. We believe that with these processes, we’ll be able to significantly expand our curated list and grow our offerings even further. This is an ongoing process that has already started and we will continue to refine and improve it as we move forward. Also with the combined operations and product development collaboration, we think we can continue to grow this aspect. Metaphorically speaking, this is really like having a bigger firehose to solve customers’ problems. As our list have grown and activity increased along the way, we’ve reexamined the pricing on a number of our most active and used list to better demonstrate that value that we’re providing.

And at the end of the fiscal year, we launched a series of pricing increase on these lists across a handful of territories and a handful of different genres. In conjunction, we’ve also grown our marketing efforts this year, both in scope and in the tools that we have at our disposal. The first of those tools being a new marketing website for Play MPE that launched just recently after the close of the fiscal year. We spent the second half of fiscal 2022 designing this new site with very specific goals in mind. First of all, we wanted to better describe the value proposition of Play MPE and how we help artists and labels grow their revenue. Another key feature that we wanted to highlight within the new site, are the many endorsements that we received from current clients.

We can describe Play MPE perfectly, but there is always extra impact when a potential client sees bringing endorsement from a successful peer or someone they have worked with in the past or someone maybe they are even in conversation with now. But we featured these testimonials in advertising before, but the new site gives us a landing page to some potential clients to directly to view all the past endorsements over Play MPE’s history. The most beneficial improvement though is a more streamlined way to process potential clients and get them into the sales flow quicker. We design every element of the site with the new client experience in mind to make sure they’re getting to the correct sign-up page for their use case, whether that be a sender or recipient, and that we’re getting all the information needed to move them through the sales flow more quickly and more efficiently.

Speaking of the sales flow, this year, we’ve taken steps to improve and, in some cases, automate that process. In March of this year, we created a new internal leads funnel to improve our lead tracking. This new funnel gives us a more analysis of which marketing channels are most effective for us both in lead generation and conversion of those leads. While the new funnel was created in March, it does take a few months to build up enough data to display an impact. So we began to see actionable information just around July of this year. Already, we found some types of advertising partners that provide the most viable leads for us, and we’ve shifted our efforts for next year with that in mind. Our sales flow currently relies quite a bit on manual actions.

We received a new lead through one of the entry points such as our websites, a partnership, client referral direct outreach. And then from then on, the reach out is done manually by a member of our sales team. As our lead generation has increased this year, it’s taken more and more manpower to process and ultimately convert these leads. So to address this late in the fiscal year, we began to work on an automation process. And that would allow us to have generated leads, move through the flow more quickly, and we believe this will raise our lead conversion percentage once implemented since it was cut down on the time between a user first coming to us and the time they upload their first release. And that’s in the nearly final testing stages now.

So we are hoping to implement that rather quickly. And with some staff restructuring this year, we hired a data scientist with the goal of improving some of our workflows and growing our business intelligence. This addition has already led to a number of opportunities for us. Play MPE is a very complex tool, and sometimes that can make it difficult to describe our value proposition clearly to new users. And that’s especially the case for independent clients who might be thinking about a marketing campaign in this way for the very first time. We obviously do a task for our clients. It’s a critical component to a successful campaign. So the question is how do we sell the value of that task and determine €“ demonstrate how it contributes to the client’s success.

In the past, we have always focused on things like client success stories, anecdotal evidence from either our users or our team’s collective years of industry experience, word-of-mouth, glowing endorsements from current clients, etcetera. But with this new analytical ability, we’re able to add to our marketing and sales information from two perspectives: the first being more objective and quantitative data to help our sales conversion. This objective data can tell labels and artists definitively how our solution is solving a problem for them. Sometimes one, they might not even know that they had originally. For example, when we compare our Play MPE managed list to our customers’ own list, our download and activity rates are objectively much higher.

We’ve always known our lists were strong, but even we were surprised by the gap and the difference there. As I mentioned earlier, turnover rates with recipients are relatively high due to the nature of the industry. And this data is a clear and direct endorsement of those proprietary processes that I mentioned that we use to keep our list current and clean. The second perspective where analytics have already played a big benefit is the information within the mechanics of the sale itself. For instance, one of the things we’ve learned is that the inclusion of ISRC codes, the portion of metadata that Fred had mentioned earlier, a release €“ the inclusion of that metadata within the release leads to a higher download rate, which, of course, positively impacts label and artist revenue.

This is just one example, and we believe there are dozens of ways that the new analytics department will benefit sales in the New Year. After the year-end, we launch an automated report designed to highlight releases that are outperforming its peers, which will help us suggest larger packages and lead to the revenue per release growing by distributing to a broader audience. In the future, we’re confident that the information provided by these analytics will lead to more automation opportunities and that will streamline our sales and marketing processes even further. Another key aspect of our marketing strategy that hasn’t quite been possible in the past couple of years has been the live events, trade shows, conferences, etcetera. Obviously, with the pandemic, many of those or all of those, I should say, were put on hold in 2020 and the majority of 2021.

But in fiscal 2022, we started to see events return to a live setting. These events often act as opportunities for us in a few different ways. First off, our attendance helps grow our direct connection with our clients and demonstrates that we’re an ingrained part of the music promotion community and being active in these spaces is particularly important in new markets where a face-to-face interaction goes much further than any kind of cold or warm reach out for that matter, via phone or e-mail or assumed conference or anything like that. For instance and I’ll mention this again a little later. One of the first Latin Music Events that we attended following COVID was the Latin Alternative Music Conference, LAMC. And we’ve already brought on new clients directly from our attendance there and our involvement.

We found that in new markets like this, the ability for an impromptu onboarding session has also led to greater activity rates rather than either virtual or a more instruction-based process. And while a full and thorough breakdown of our business development strategy and target markets can be found by referring to our 10-K, I do want to highlight a few key points here on this call. we began commercially charging for distributions within Canada in May of this year at introductory rates. As I mentioned, when discussing our new international genres, initially in Canada, our business came from Canadian clients who desire to distribute content internationally. So launching commercial pricing for internal distributions is a major step forward in the market.

After the conclusion of the fiscal year, the introductory period also came to an end, and we are now at standard pricing across Canada. We also continue to make progress in the Latin market, and we’re in the adoption stage there for the sales funnel. This year, we entered into our first pilot agreement, and we hope to lock in more moving forward. Having clients adopt Play MPE in a new market like this is very much kind of a chicken or the egg scenario. Of course, tenders are going to want their content delivered to an active user base, but recipients are only going to increase their activity with quality content available to them when they log on. As we touched on the activity rates of our Latin lists are continuing to grow along with many of the other managed lists here at Play MPE.

But we still need to build this activity even further to separate those markets and be able to sell directly a Mexico distribution or an Argentinian distribution and so on and so forth. One way that we’ve been doing this is attendance and involvement in those market events just like LAMC, which I mentioned a minute ago. And from our attendants in that event, we did see a direct increase in activity from our users as well. Over the course of this fiscal year, our list activity in the Latin market, which includes U.S. Latin stations, Puerto Rico, Mexico, Central and South America, the activity rates there grew by about 64%. And in the United States, this year, we saw excellent growth in major label revenue. Most notably, that was led from Warner Music Group, which increased as a company by over 50% year-over-year.

A lot of that was created by a large increase from Elektra Music Group as well as some of the deals at Warner. This trend is not only great from a pure revenue standpoint, but it’s extremely helpful in expanding Play MPE usage into new genres within the U.S. Major labels are rather unique compared to smaller entities in that they are large enough to have multiple promotion departments under 1 umbrella, serving severe genres. So you’ll have a rock department, a country apartment, etcetera, and they usually work rather independently from each other. And with usage increasing, the teams working to establish genres, we have the leverage to try to expand those relationships and get a foot into other departments. One example of that from the past year is Atlantic Records, where we were able to use a long-standing relationship we have with their AAA radio team to get an endorsement for their rhythmic department.

And now we’re seeing a steady flow of rhythm releases, which just like I mentioned with Latin, will help lead to increased activity rates on those lists and just increase the value further from there. And with that, I’ll pass it over back to Fred to talk about some points looking forward.

Fred Vandenberg: Thanks, Allan. Okay. So looking forward, I touched on this earlier, but the completion of the completion, there you go, I’m using the word, the launch of the global infrastructure was a gigantic task. And there is a major accomplishment that we completed, there I again, that we launched in about midyear. So what that does is while we’ve built up a little bit of technical debt in other areas of the platform that we need to address because we’ve been really focused in on this global infrastructure, we can allocate some of our development, design and development time to things that start to get really interesting and the things that I’ve been wanting to work on for a long time. But these are things like €“ whether it’s a new product like a new functionality within Play MPE that can either directly generate some revenue or it’s a catalyst to sales or what have you, an example is something that €“ we expect to launch our first iteration of it later this month or at least this year.

It’s €“ we call it super serve but it’s €“ it’s a new way of using Play MPE. Play MPE right now is where you set up a release and it goes to a list of €“ curated list of recipients. Superserve is really just taking an asset, a piece of music and send it to a particular individual, like one person, maybe or two or whatever. But it’s a really quick way to send a link to a piece of music. And that’s used in different ways. We’re just working through the fine points of it, how it mechanically works. But it’s a new way to attract new users, and we’re thinking that it will expand the use of Play MPE. So it’s a slightly different use case, potential new users, potential new fees. And another thing that’s got me particularly excited is we’ve alluded to it in past calls.

It’s radio monitor, digital streaming monitor where we report on plays of like digital plays of songs in radio. And you know what, again, I hesitate to use the word radio because it gives people thinking about terrestrial radio, but it’s not that simple. It’s any digital stream that’s broadcast over the Internet to a broad audience and that €“ we’ve been working on that for the last 12 to 18 months. And we initially didn’t have a tremendous amount of resources allocated to it. It was more of a not skunk works, but it was €“ it was a technical idea that had some exploration. And we’ve jumped over a few hurdles or technical challenges in scaling that in generating fingerprints, matching those fingerprints and there is several really interesting complex technical issues associated with that.

But we launched earlier this month a proof-of-concept version of that. It’s just a very, very well, relatively small use of it, just to see how it works, test or accuracy, that sort of thing, and we will see how that goes. But that’s a standalone product that we can sell to Play MPE customers, but it’s distinct and can be sold outside of our Play MPE platform. There is I think some of the things that really are interesting, and we’re prioritizing where our staff spends their time now. We’re trying to figure out what the order of development items are. But there is a tremendous amount of opportunity for us to use the expanded development team to do all sorts of things. Like one of the €“ Allan alluded to, the firehose of sales where one of the delineating factors is how many recipients we have on the platform.

So our revenue generally is the number of releases times the number of recipients who are getting that and times the value that we’re providing. So the more lists, the more recipients you have, the more ways you can package those lists, the more revenue you’re going to make. And we launched some additional international distributions earlier this €“ this €“ when I say this fiscal year, I mean, in 2023. So just this past month or 2 months ago, we launched an international distribution for our list. And Allan talked about it in a little bit more detail, probably said it a lot better than I am. But it’s really just a way of repackaging existing recipients on our platform into ways that will generate larger sales. But that’s not where product and engineering can help where their help ends.

It’s making those lists more easily selectable. It’s making recipients who are not already on our list more accessible, maybe they get to be put on more lists. They are interested in different genres. There is other things that engineering can help with where one of our best referrals is where someone is promoting a song to radio. And that radio station says, look, just send it to me through Play MPE. Well, there is technical ways we can facilitate that transaction and that communication. And whether it’s requests for new content from a particular artist, whether it’s requests for more version of that particular song or whether it’s requests for customers who are not even in the platform yet to send it through the platform. But these are things, technical issues that we were €“ the list is literally endless and it’s really quite exciting, but we finally have the resources.

As the years have moved on, we’ve adjusted our resources. But as we’ve grown revenue, we’ve added capacity to develop. And I think the global infrastructure items for Universal was a big task. We knew it was a big task, but it was with some €“ probably some scope creep in there. It was just a gigantic accomplishment for us this year. But now it’s really quite exciting to start working on all the things that you would think a network of activity would work on to generate engagement and reinforce that engagement. And it’s all the things that a traditional like an Instagram or Facebook or any kind of social media. I mean we’re not social media, but it’s the same kind of process where you can facilitate increased use and increase engagement and enhance the value.

And then looking forward, we’re just going to continue to advance our business development initiatives. Things are opening up and face-to-face contact has proven to be a little bit more effective than potentially what we’ve been working on over the last couple of years with COVID. It’s been a hard slog. People aren’t necessarily working in the office and getting the hold of people and meeting people. That’s been a little bit challenging. But as things open up, I think we continue to advance those business initiatives. We’ve made some progress in there, but I think we will be more effective going forward. And with that, I will turn it over to questions if there are any.

Operator: Great. Thank you, Fred and Allan. We have one question, Gerry, do want to go ahead, and unmute. Sorry, Gerry Wimmer. Hi, Gerry, do you want to go ahead.

Q&A Session

Fred Vandenberg: Gerry, I think, you are on mute. It looks like we’re having some technical challenges there, Rebecca. Is there any other?

Operator: I think so, yes. Tom, if you want to go ahead, and we can come back to Gerry.

Fred Vandenberg: Spencer is on mute as well.

Unidentified Analyst: Can you hear me?

Fred Vandenberg: Yes. Okay.

Unidentified Analyst: Okay. We finally got it. Fred, you’re a pretty conservative guy, and we’ve known each other for a little while. So I was €“ you sound a little bit more excited about things now. And so I was kind of wondering if you could elaborate on that a little bit. And as an investor, our obvious concern is the stock price. And so I think all of us are looking for or if I could speak that way, I think all of us are looking for some indication that the income is going to start to show up that will in turn impact the price.

Fred Vandenberg: Okay. Thanks, Spencer. So where to start, the optimism €“ there is probably a few things that are funneling that, the big one was the €“ as I’ve probably mentioned during the presentation was the launch of the global infrastructure for UMG. Now again, I think we’ve had some technical debt from that, and we had some €“ that is still going to require a lot of work. But there are €“ we have to move our product development staff over to all these new opportunities. And we’ve already started to transact those. We launched the international list. And I think we’re working on things to engage those recipients, move them on to more lists. And that is just pure math. It’s just going to €“ it’s just a real function of the math of the more you have to sell, the easier you make it to sell, you are going to increase your revenue.

And I think there is things that we’re working on that are pretty exciting. The radio monitoring or we’ve been working on €“ on building that out later in the year. We hired front end, back end engineers, product manager, marketing manager, and we are starting to work out our business case for that, like how €“ plan of our attack for that business and branding and all sorts of things. And I €“ that one is, I know it’s a useful tool. It’s a matter of how quickly we can ramp up those €“ the revenue from it. There is a certain amount of fixed cost building that platform out and operating costs. And then it’s a real €“ that’s a true SaaS type of business where you have monthly fees or €“ and that starts to get really interesting for us.

We have had some staffing changes as well. Some of them were planned, some of them were not. But I think in many of the cases that we really undertook a lot of staffing changes over the last few years. And with those staff, they also built teams under them that are really good, strong individuals. And while some of the turnover this year was unplanned, it resulted in some really exciting opportunities for us. The data analytics one is something I think we have been wanting to do for a while, and it’s really interesting endeavor for us. It’s provided us some really key information, whether it’s value that we are providing or it provides €“ we are building out reports to up-sell where release, for example, that with that analytics, when the release is doing well in the country, in the United States.

If we haven’t already sold it as an international package, we can then automatically turn around and up-sell that to an international distribution, and we are working on fully automating that. But there is lots of things like that, like it’s just these endless ideas. The trick is not so much how do you grow revenue. It’s which opportunity you take first to toggle that needle a little bit faster. We might not make the right decision all the time. But I think we have got some really smart people working on the problems and that’s €“ I think that’s what really gets me excited the most. The stock price was €“ that’s a little bit of a challenging one. I think I can go out and tell the story more broadly and put more effort into that. Ultimately, we are a public company, and we need to tell people what we are doing, and that’s what we try to do in these earnings calls.

Whether we do it effectively, whether we do it to new people is a different question. I think right now, with the interest rates the way they are, there €“ we are a micro-cap stock and that’s the last place people put money in when interest rates are a little higher and first place to leave money. But I think ultimately, if we do the things that I think we are capable of doing, we will raise revenue, raise income. And those €“ that stock price will take care of itself. I am not going to try to absolve us of any future responsibility of going out and to tell people. But I think the priority right now is to really work on the things that are going to toggle the needle so that the longer term benefit is larger.

Unidentified Analyst: A quick follow-up. Do you think you are fully staffed now?

Fred Vandenberg: That’s a good question. Short answer is no. But that depends on what you are asking. Like we are overstaffed if we all we wanted to do is maintain revenue. The investments we are making now, though, is to grow. And I understand that there is, at some point, you have got to answer that question, you got to say, yes, we are going to grow and here is the growth. But this is really the first time we have to work on those really interesting things that are going to toggle the needle. And I think if you know if we doubled our revenue tomorrow, I would spend more on things to like the opportunities are really there. We see them. And I think we would grow our expenses to chase after some synergistic opportunities that we have.

Unidentified Analyst: Okay. I think that’s it for me. Thanks.

Fred Vandenberg: Thanks Spencer .

Operator: Thank you. And so Gerry, do you want to try and go ahead and un-mute yourself again.

Gerry Wimmer: I apologize if I ask a question that was asked prior because I missed maybe some of the Q&A. First of all, has your buyback been renewed for €“ in the current fiscal year?

Fred Vandenberg: It is not currently yet. No.

Gerry Wimmer: Okay. I just €“ any reason why considering the stock is at 6-year lows?

Fred Vandenberg: Well, yes, there is reasons why. I think it’s hard to buy, to be quite frank. We authorized it last year, and we were only able to buy, I think it was about 200,000 shares. It’s in the press release. I don’t remember that €“ but it was hard to buy. And I think people worry about how it sends the message that we don’t have an ability to grow or whatever, but I don’t think that’s true. I think people realize that we can €“ with the cash that we have and how we are operating that we can do both. But I mean, I agree that the stock price is, I would love to take a bunch off the market if I could easily do that. Yes. I mean it’s something to think about I guess, but we haven’t renewed it yet.

Gerry Wimmer: Yes. I mean the stock is at 5-year or 6-year lows, it seems €“ you feel there is value here, and now we are at 6-year low, now the company is not buying back stock. So, I just €“ it kind of contradicts itself a bit. But anyway, my next question is, I mean the last €“ from a shareholder standpoint, last 5 years, you had low-single digit growth if you look over the 5 years. What’s going to change now, we are going to go beyond this really slow growth period for the last 5 years and accelerate growth to double digit and more. We have a pretty small revenue base. We are a public company and at least double-digit annual growth would be an absolute minimum for a public company to garner any attention. Can you give me any comments on that?

Fred Vandenberg: Well. Okay. So, on that last statement, I am not sure if I would agree. Maybe contextually, I would. We are targeting growth and we €“ what’s different now is €“ so over the last few years, we made a strategic decision to build out the global infrastructure capabilities for Universal. They have operated all these global infrastructure capabilities within a PC application, a desktop application. We transferred all those capabilities over to a browser-based version. And in doing so, we added a lot of functionality. That process took longer than I think everyone expected it was more involved, more complex. These are extremely complex features that are being developed. And I don’t know if we are €“ we grew revenue that is in line with that investment.

But that was a strategic decision, potentially less focused on revenue growth. I think our true revenue growth is on smaller in these €“ trying to grow internationally rather than a global infrastructure deal, that deal is sort of an anchor tenant, but it’s €“ the money is going to be made on things that we do to grow our list, grow the things that we can sell. And I think we can invest in those things now. The other side of it is you do need, especially with Play MPE, like with the radio monitoring product that we are working on, that’s a whole different thing. Lots of complementary aspects to Play MPE, but radio monitoring does not have the same seeing of it. You don’t need to see a particular market with content, grow recipient usage and then have that sort of snowball over time and build that market out like we are doing with Latin.

So, two things, we have got the new product, new service, but we are making progress with Latin as well where you see that market with content and you see €“ you grow recipient usage. Allan touched on the progress. It hasn’t been as fast as we had wanted it to be. But the reality is, is that, that’s going to take time in any event. We saw it when we originally built out the platform in 2003 to 2008. It took a while to change people’s behaviors, get people to realize what Play MPE is, get to people to see what music is on that platform, get people to send content. So, it’s that effort. The lag between the effort and when you start to see revenue that I think we will start to improve. So, in summary, it’s like the new products that we can work on now that can toggle revenue within Play MPE or new services.

And then also just that effort, that longer term effort will start to pay off. We are seeing progress in Canada. We are seeing progress in South Africa, which is a tiny market really, but it’s just a proof of concept. And then with new genres in the United States and then Latin, and Latin is a gigantic market, too. It’s €“ but we are making progress there.

Gerry Wimmer: My point is if they are not higher growth rates than what we did in the last 5 years, substantially higher in the next 5 years or 3 years, the market valuation of the company is going to be stagnated. And so I just wondered what are ways that you and your Board are looking alternatively to unlock shareholder value?

Fred Vandenberg: Yes. Okay. Well, that’s €“ okay, that’s a different question. So, I think you are right, like ultimately, what’s that phrase, we might have making negative margins, but we will beat them on volume or something like that. I mean we are not silly. We do expect to grow our margins and produce cash €“ positive cash flow for our investors. I think our approach has been to grow Play MPE use. So €“ and I think you have to cover that base of that fixed cost providing that service. There is variable costs, of course, but the margins are decent. And if we can bridge that gap where we can make an inflection point for Play MPE and grow revenue, then I think you will see a tremendous increase in cash flow. And that’s the basis on which you will see shareholder value.

The radio monitoring is a complementary product that is circularly reinforcing. So, customers of Play MPE well €“ we hope to sell to customers of Play MPE and earn some money that way. But it may also work in the opposite direction. So, you might be able to sell radio monitoring to a customer that hasn’t €“ doesn’t use Play MPE and then they will be complementary in that aspect as well. And there is €“ it’s just a natural progression of aspects of digital promotion. And I think that this industry is evolving. It’s not €“ and I have said this before, but we are not €“ we didn’t evolve into the digital industry. We are evolving into. There is just a tremendous amount of opportunity out there. And whether it’s royalty, remittance, we see in South Africa, for example, one of the reasons why our engagement with releases that have ISRC codes is that a royalty remittance and collection in South Africa is a real problem.

That’s down the road, but maybe we can help there as well.

Gerry Wimmer: My only point is that you or the Board may have to consider the other options to unlock shareholder value and have Destiny part of a larger organization, either by acquiring or be acquired. It’s going to be a long chunk for a microcap stock. I mean I know it’s the stock €“ micro caps are in the seller right now. But you will start is at a 6-year low. It’s not at a 52-week low or a 2-year low, it’s at a 6-year low. And unlocking shareholder value with at the pace that you have been growing in the past and the pace that you might grow in the next 2 years might be a very difficult task. So, I am just saying the obvious, to be honest. You guys are doing good things. Don’t get me wrong, but it’s €“ I don’t think the share price will reflect it going forward for a while on a company that has $4 million revenues. It’s my opinion so…

Fred Vandenberg: I don’t think I am disagreeing with it, Gerry. We ultimately have to unlock shareholder value. I don’t think €“ if we cannot grow, if we did not €“ if we don’t see an inflection point in our growth rate, then I think we will revisit ways to unlock shareholder value. We are sitting on a little bit more than $2 million in cash, where our market cap is about $5 million. It doesn’t take long for us to generate that much cash flow if we are not trying to grow to far exceed our market cap. So, at some point, we have to answer the question, are our efforts going to result in revenue growth? Fair question. No question. I think ultimately, we want to provide cash flow to investors, whether that is an opportunity to sell your shares or take over or grow by acquiring.

We do look at acquisitions we have. And I think maybe we need to invest a little bit more time in thinking about that as well, so we can grow faster. But they tend to be very expensive. But we will see. We will look at it. But I also think we have seen enough success even in the Latin market. If we continue to grow there, we will start to grow the revenue there. And I think you will see €“ I would rather try to generate cash when we are twice, 3x, 4x the size for Play MPE, then to generate €“ to give up on growth now and generate cash, if that makes any sense.

Gerry Wimmer: Yes. Like I said, I have been looking for the inflection point, but with the inflection points 2 years, 3 years from now, will probably be a flat line in valuation. So, unlocking shareholder value, looking at things differently, like I said, either buying or be bought maybe the way, that’s just how I may see it. But anyways, you could disagree or not, but I think it’s a valid point, very valid point.

Fred Vandenberg: Yes. Okay.

Gerry Wimmer: But thank you, Fred. Thanks for taking my questions.

Operator: That looks like that’s the last question for today.

Fred Vandenberg: Thanks everyone and thanks for attending. Thanks for the questions. And we will see you next quarter.