DESTINY MEDIA TECHNOLOGIES INC
For the period ended Feb 29, 2024. Filed Apr 15, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Feb 29, 2024 · Filed Apr 15, 2024
DSNYStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-11-30; filed 2024-01-16.
0001062993-24-000877
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-02-29; filed 2024-04-15.
0001062993-24-008379
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 128 current paragraphs.
88 unchanged; 18 reworded; 14 added; 3 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 6 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
The growth in revenue for the quarter arose from both our Major Label customers (9.1%) and independent labels (10.3%). Commencing in the first quarter of fiscal 2023, the Company began capitalizing on its international presence by introducing international bundles. The Company's goal was to provide easy access to a larger international distribution to clients desiring a more global campaign. The Company has received a very positive response to these bundles and this initiative has increased the size of the average purchase and accounts for approximately one third of the growth seen in the current quarter. The Company is currently making investments to further expand its international recipient base to further expand the appeal and value of these distributions. The larger portion of growth for independent labels comes from increased sales which is in line with historical trends.
Current report
The notable driver of higher fluctuations in total salaries and wages is the reduced amount capitalized to software under development intangible asset in this period. This reduction has led to an approximately 12.9% increase in total operating expenses for the three months ended February 29, 2024.
Current report
Additionally, notwithstanding the amount capitalized to software under development, salaries and wages increased by 12.0% due to the addition of key personnel as well as staff turnover period over period.
Current report
The increase in wages and benefits is primarily attributed to the addition of key personnel in the department along with staff turnover during the current period.
Current report
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023
Current report
Revenue
Current report
The revenue increase in the first half of fiscal 2024 was driven by both our Major Label customers (7.5%) and independent labels (15.6%). Consistent with the results for the current three-month period, the Company’s revenue for the six months was bolstered by the introduction of international distribution channels in the prior year. The use of these bundles continues to grow and increase the average distribution size. For the six-month period ended February 29, 2024, these international bundles accounted for almost half of the growth from independent labels. The larger impact in the Company’s first quarter is primarily attributed to a newly added international list dedicated to holiday music. While the Company is uniquely capable of providing international distribution channels, the Company is making investments to expand the depth and breadth of the options available due to the success seen in the early stages of this initiative.
Current report
Gross Margin
Current report
Operating Expenses
Current report
Operating costs during the six months ended February 29, 2024 increased by 23.3% to $1,749,859 (February 28, 2023 - $1,419,593). This rise can be primarily attributed to the following factors:
Current report
Although total salaries and wages rose by 6.7% compared to the previous period, the portion of salaries and wages capitalized to software under development intangible assets decreased this period, resulting in a 12.0% increase in total operating expenses.
Current report
Depreciation and Amortization
Current report
Other Income
Current report
Financing Activity
Removed paragraphs (3)
Previous report
The increase in revenue was driven by growing international distributions from existing customers. Throughout the prior fiscal year, the Company introduced easy to select international distribution lists by genre of music. With growing investments in recipient activity in multiple jurisdictions, the Company grew average revenue per sale by providing greater distribution channels. This increase accounted for approximately half of the growth in the first quarter. The remaining revenue growth is split between a growing customer base in well established markets and progress in the Company’s emerging markets.
Previous report
While total salaries and wages remained relatively consistent with the prior period, the amount capitalized to capital software assets and software under development intangible asset was lower this period, resulting in an increase to total operating expenses of approximately 11.1%.
Previous report
Financing Activities
Reworded paragraphs (18)
Previous wording
Our common stock trades on TSX Venture Exchange in Canada under the symbol “DSY”, on the OTCQB U.S. (“OTCQB”) under the symbol “DSNY”, and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol DME1.F, WKN 935 410.
Current wording
Our common stock trades on TSX Venture Exchange in Canada under the symbol "DSY", on the OTCQB U.S. ("OTCQB") under the symbol "DSNY", and on various German exchanges (Frankfurt, Berlin, Stuttgart and Xetra) under the symbol "DME1.F"
Previous wording
MTR™ (or "Music Tracking Radar" or "Meter"https://www.musicmtr.com) is a digital tracking service that tracks and reports the number and times an individual track is played. MTR™ uses a proprietary algorithm to uniquely identify and match a track. The Company launched MTR™ in beta in fourth quarter of 2023. During the beta phase of this new product, the Company will test monitoring uptime, customer acquisition activities and is adding functionality for sale at scale. The beta version of the platform will initially monitor digital broadcasts of 800 stations in Canada.
Current wording
MTR™ (or "Music Tracking Radar" or "Meter"https://www.plaympe.com/track/) is a digital tracking service that tracks and reports the number and times an individual track is played. MTR™ uses a proprietary algorithm to uniquely identify and match a track. The Company launched MTR™ in beta in fourth quarter of 2023. During the beta phase of this new product, the Company will test monitoring uptime, customer acquisition activities and add functionality for sale at scale. The beta version of the platform will initially monitor digital broadcasts of 800 stations in Canada.
Previous wording
Total revenue for the three months ended November 30, 2023 was $1,154,802 compared to the revenue of $1,020,737 for the three months ended November 30, 2022, an increase of 13.1% period over period. After adjusting for foreign exchange rates, the Company’s revenue for the three-month period grew by 10.6%.
Current wording
Total revenue for the three months ended February 29, 2024 was $986,338 compared to the revenue of $899,042 for the three months ended February 28, 2023, an increase of 9.7% period over period. After adjusting for foreign exchange rates, the Company's revenue for the three-month period grew by 9.0%.
Previous wording
Gross margin for the three months ended November 30, 2023 was 85.8% of revenue, compared to 87.3% for the three months ended November 30, 2022. The Company's cost of revenue consists of data hosting and processing charges, third party transaction related costs, and engineering, technical and customer support costs. These costs are driven by the size and volume of customer transactions processed, as well as the relative proportion of "full-service" versus "self-service" revenue. Our self-service sales are derived from customers who have been provided with a customer account to access our encoder to independently upload and publish releases. Our full-service revenue is derived from customers who are fully serviced by our internal staff, who prepare and publish releases on their behalf. During the three months ended November 30, 2023, our gross margin decreased over the comparative period primarily due to increased staffing in the technical and customer support departments.
Current wording
Gross margin for the three months ended February 29, 2024 was 86.3% of revenue, compared to 85.9% for the three months ended February 28, 2023. The Company's cost of revenue consists of data hosting and processing charges, third party transaction related costs, and engineering, technical and customer support costs. These costs are driven by the size and volume of customer transactions processed, as well as the relative proportion of "full-service" versus "self-service" revenue. Our self-service sales are derived from customers who have been provided with a customer account to access our encoder to independently upload and publish releases. Our full-service revenue is derived from customers who are fully serviced by our internal staff, who prepare and publish releases on their behalf. During the three months ended February 29, 2024, our gross margin increased compared to the same period last year, mainly driven by revenue growth outpacing the increase in cost of revenue.
Previous wording
Operating costs during the three months ended November 30, 2023 increased by 18.3% to $753,394 (November 30, 2022 - $637,092). The increase in operating costs was primarily the result of the following:
Current wording
Operating costs during the three months ended February 29, 2024 increased by 27.3% to $996,465 (February 28, 2023 - $782,501). The increase in operating costs was primarily the result of the following:
Previous wording
Due to the growth of salaries and wages capitalization in the prior year, the amortization of computer software in the current period resulted in a 7.0% increase in total operating expenses.
Current wording
Furthermore, due to the growth of salaries and wages capitalization in the prior year, the amortization of computer software in the current period resulted in a 6.5% increase in total operating expenses.
Previous wording
The decline in wages and benefits is attributed to a temporary reduction in full-time equivalent staffing for the three months ending November 30, 2023. Professional fees decreased from the prior period due to one-time litigation expenses, which were resolved through a favorable judgment in the Company’s favor in the prior year.
Current wording
The rise in wages and benefits can be primarily attributed to a temporary reduction in full-time equivalent staffing for the comparative period ending February 28, 2023. Professional fees decreased from the prior period due to one-time litigation expenses, which were resolved favorably in the Company's favor in the preceding year.
Previous wording
Depreciation and amortization expense increased to $81,098 for the three months ended November 30, 2023 from $36,379 for the three months ended November 30, 2022, an increase of 122.9% due to depreciation of additionally capitalized software development costs associated with Play MPE® recipient player applications during the period.
Current wording
Depreciation and amortization expense increased to $87,026 for the three months ended February 29, 2024 from $35,952 for the three months ended February 28, 2023, an increase of 142.1% due to depreciation of additionally capitalized software development costs associated with Play MPE® recipient player applications during the period.
Previous wording
Interest income earned on the Company's mutual funds was $11,526 for the three months ended November 30, 2023 (November 30, 2022 - $7,668).
Current wording
Interest income earned on the Company's mutual funds was $15,461 for the three months ended February 29, 2024 (February 28, 2023 - $8,777).
Previous wording
During the three months ended November 30, 2023 the Company reported a net income of $249,516 (November 30, 2022 - $258,266).
Current wording
During the three and six months ended February 29, 2024 the Company reported a net loss of $130,012 and net income of $119,504, respectively (February 28, 2023 – net loss of $1,276 and net income of $256,990, respectively).
Previous wording
For the three months ended November 30, 2023, adjusted EBITDA was $332,893 (November 30, 2022 - $324,134). Adjusted EBITDA is not defined under U.S. GAAP, and it may not be comparable to similarly titled measures reported by other companies. We used Adjusted EBITDA, along with other GAAP measures, as a measure of our profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense.
Current wording
For the three and six months ended February 29, 2024, adjusted EBITDA was $(47,792) and $285,101, respectively (February 28, 2023 - $63,984 and $388,118, respectively). Adjusted EBITDA is not defined under U.S. GAAP, and it may not be comparable to similarly titled measures reported by other companies. We used Adjusted EBITDA, along with other GAAP measures, as a measure of our profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense.
Previous wording
As at November 30, 2023, we held $1,832,365 (August 31, 2023 - $2,002,769) in cash and cash equivalents. The Company's cash equivalents consist of investments in mutual funds with a major Canadian financial institution that earn interest at variable interest rates ranging from 4.55% - 4.90%.
Current wording
As at February 29, 2024, we held $1,539,685 (August 31, 2023 - $2,002,769) in cash and cash equivalents. The Company's cash equivalents consist of investments in mutual funds with a major Canadian financial institution that earn interest at variable interest rates ranging from 4.55% - 4.90%.
Previous wording
At November 30, 2023, we had working capital of $2,170,568 compared to $2,185,960 as at August 31, 2023. The decrease in our working capital was primarily due to operating results.
Current wording
At February 29, 2024, we had working capital of $1,895,969 compared to $2,185,960 as at August 31, 2023. The decrease in our working capital was primarily due to operating results.
Previous wording
The following table sets forth a summary of the net cash flow activity for each of the periods indicated:
Current wording
The following table sets forth a summary of the net cash flow activity for the periods indicated:
Previous wording
Net cash provided by operating activities during the three months ended November 30, 2023 was $188,769 (November 30, 2022 -$459,537). The primary reason for the decrease in cash flows from operating activities is related to the timing of receipts from our customers and the timing of payments to our vendors.
Current wording
Net cash provided by operating activities during the six months ended February 29, 2024 was $133,673 (February 28, 2023 -$402,169). The primary reason for the decrease in cash flows from operating activities is related to the timing of receipts from our customers.
Previous wording
Net cash used in investing activities for the three months ended November 30, 2023 was $177,402, compared to cash used by investing activities of $248,309 for the three months ended November 30, 2022. The period-over-period decrease was mainly driven by the lower proportion of software development salaries and wages capitalized in the current period.
Current wording
Net cash used in investing activities for the six months ended February 29, 2024 was $281,563, compared to cash used in investing activities of $456,792 for the six months ended February 28, 2023. The period-over-period decrease was mainly driven by the lower proportion of software development salaries and wages capitalized in the current period.
Previous wording
Net cash used in financing activities during the three months ended November 30, 2023 was $170,778 (November 30, 2022 - $Nil) - this cash was used to repurchase and retire 172,000 shares of common stock (November 30, 2022 – no shares of common stock were repurchased) of the Company under the Normal Course Issuer Bid (“NCIB”).
Current wording
Net cash used in financing activity during the six months ended February 29, 2024 was $306,680 (February 28, 2023 - $Nil) - this cash was used to repurchase and retire 309,300 shares of common stock (February 28, 2023 – no shares of common stock were repurchased) of the Company under the Normal Course Issuer Bid (“NCIB”).
Previous wording
For a description of our critical accounting policies, see the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Judgements and Estimates" and "Financial Statements and Supplementary Data - Note 2, Summary of Significant Accounting Policies" contained in our 2023 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the three months ended November 30, 2023.
Current wording
For a description of our critical accounting policies, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Judgements and Estimates” and “Financial Statements and Supplementary Data – Note 2, Summary of Significant Accounting Policies” contained in our 2023 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the three and six months ended February 29, 2024.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Total revenue for the six months ended February 29, 2024 was $2,141,140 compared to the revenue of $1,919,779 for the six months ended February 28, 2023, an increase of 11.5% period over period. After adjusting for foreign exchange rates, the Company's revenue for the six-month period grew by 9.9%.
Current report — wording carried from elsewhere
Gross margin for the six months ended February 29, 2024 was 86.0% of revenue, compared to 86.7% for the six months ended February 28, 2023. The Company's cost of revenue consists of data hosting and processing charges, third party transaction related costs, and engineering, technical and customer support costs. These costs are driven by the size and volume of customer transactions processed, as well as the relative proportion of "full-service" versus "self-service" revenue. Our self-service sales are derived from customers who have been provided with a customer account to access our encoder to independently upload and publish releases. Our full-service revenue is derived from customers who are fully serviced by our internal staff, who prepare and publish releases on their behalf. During the six months ended February 29, 2024, our gross margin decreased compared to the same period last year, primarily due to slower revenue growth compared to the increase in cost of revenue.
Current report — wording carried from elsewhere
Additionally, due to the growth of salaries and wages capitalization in the prior year, the amortization of computer software in the current period resulted in a 6.8% increase in total operating expenses.
Current report — wording carried from elsewhere
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software for the six months ended February 29, 2024 and February 28, 2023.
Current report — wording carried from elsewhere
Professional fees decreased from the prior period due to one-time litigation expenses, which were resolved through a favorable judgment in the Company's favor in the prior year.
Current report — wording carried from elsewhere
The increase in wages and benefits is linked to a lower amount capitalized to capital software assets and software under development intangible assets in the current period. During the comparative period, the Company prioritized the development of its new product, MTR™, which subsequently underwent a beta launch in the summer of 2023. Following the launch, there has been a reduction in the capitalization of wages and salaries associated with the MTR™ product.
Current report — wording carried from elsewhere
Depreciation and amortization expense increased to $168,124 for the six months ended February 29, 2024 from $72,331 for the six months ended February 28, 2023, an increase of 132.4% due to depreciation of additionally capitalized software development costs associated with Play MPE® recipient player applications during the period.
Current report — wording carried from elsewhere
Interest income earned on the Company's mutual funds was $26,987 for the six months ended February 29, 2024 (February 28, 2023 - $16,445).