DESTINY MEDIA TECHNOLOGIES INC
For the period ended May 31, 2024. Filed Jul 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.
May 31, 2024 · Filed Jul 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 2024-02-29; filed 2024-04-15.
0001062993-24-008379
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-05-31; filed 2024-07-15.
0001062993-24-013709
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 128 previous paragraphs and 128 current paragraphs.
89 unchanged; 24 reworded; 14 added; 14 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 12 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
Total operating expenditures for the three-month period ended May 31, 2024 increased by 13.6% due to a reduction in the amount of salaries and wages capitalized to the balance sheet. Total salaries and wages decreased by 4.0%. A reconciliation is provided below.
Current report
Due to capitalization of salaries and wages in previous periods, depreciation of computer software increased in the current period and resulted in a 6.0% increase in total operating expenses.
Current report
The above increases were offset by a 12.4% reduction in total operating expenses due to the timing of professional services provided and a reduction in legal expenditures for a claim that was resolved in the Company's favor in the preceding year.
Current report
The decrease in wages and benefits is primarily due to a one-time recruitment fee and the Company's portion of matching ESPP contributions incurred during the comparative period ending May 31, 2023. Professional fees also decreased due to the timing of services provided and the resolution of a one-time litigation favorably for the Company in the preceding year.
Current report
The increase in wages and benefits is primarily attributed to one-time costs associated with a restructuring of the business development group that commenced in the third quarter of 2024.
Current report
Depreciation and amortization expense increased to $87,760 for the three months ended May 31, 2024, from $37,182 for the three months ended May 31, 2023, an increase of 136.0%. This increase was due to the depreciation of newly enhanced features in the Play MPE® Player and Caster computer software applications.
Current report
Gross margin for the nine months ended May 31, 2024 was 86.4% of revenue, compared to 87.0% for the nine months ended May 31, 2023. During the nine months ended May 31, 2024, our gross margin remained relatively unchanged compared to the same period last year, indicating that the growth in the cost of sales has kept pace with the growth in revenue.
Current report
Total operating expenditures for the nine-month period ended May 31, 2024, increased by 12.6% due to a reduction in the amount of salaries and wages capitalized to the balance sheet. Total salaries and wages rose by 2.9% compared to the previous period.
Current report
Due to the capitalization of salaries and wages in previous periods, depreciation of computer software increased in the nine-month period, resulting in a 6.5% rise in total operating expenses.
Current report
In the previous period, the Company realized a substantial currency gain that was not repeated in the current fiscal year. This contributed to a 5.1% increase in total operating expenditures for the nine-month period ended May 31, 2024.
Current report
The above increases were offset by an 8.9% reduction in total operating expenses due to the timing of professional services provided and a reduction in legal expenditures for a claim that was resolved in the Company's favor in the preceding year.
Current report
The decrease in wages and benefits is primarily due to a one-time recruitment fee and the Company's portion of matching ESPP contributions incurred during the comparative period ending May 31, 2023. Professional fees also decreased due to the timing of services provided and the resolution of a one-time litigation favorably for the Company in the preceding year. Additionally, during the comparative period, the Company maintained a substantial cash balance in the foreign currency accounts, resulting in a significant foreign exchange gain recorded upon the revaluation of cash.
Current report
Depreciation and amortization expense increased to $255,884 for the nine months ended May 31, 2024 from $109,513 for the nine months ended May 31, 2023, an increase of 133.7%. This increase was due to the depreciation of recently capitalized additions in the Play MPE® Player and Caster computer software applications.
Removed paragraphs (14)
Previous 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.
Previous 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.
Previous 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.
Previous report
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 report
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 report
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 report
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023
Previous 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.
Previous 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.
Previous report
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.
Previous report
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.
Previous report
The rise in wages and benefits is attributed to a one-time consulting fee, as well as staff turnover and the addition of key personnel in the department in the current period.
Previous report
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.
Previous report
Net Income (Loss)
Reworded paragraphs (24)
Previous wording
In this report, "we," "us," "our," "our company", "Destiny" and similar references refer to Destiny Media Technologies, Inc., a Nevada corporation, and its wholly-owned subsidiaries: Destiny Software Productions, Inc. ("DSNY"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"), and (ii) the term "common stock" refers to the common stock, par value $0.001 per share, of Destiny Media Technologies, Inc., a Nevada corporation. The financial information included herein is presented in United States dollars unless otherwise indicated.
Current wording
In this report, "we," "us," "our," "our company", "Destiny" and similar references refer to Destiny Media Technologies Inc., a Nevada corporation, and its wholly-owned subsidiaries: Destiny Software Productions, Inc. ("DSPI"), MPE Distributions, Inc. ("MPE"), Tonality, Inc. ("Tonality"), and Sonox Digital Inc. ("Sonox"), and (ii) the term "common stock" refers to the common stock, par value $0.001 per share, of Destiny Media Technologies, Inc., a Nevada corporation. The financial information included herein is presented in United States dollars unless otherwise indicated.
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"
Current wording
Our common stock trades on TSX Venture Exchange in Canada under the symbol "DSY.V", 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
Our corporate website is located athttp://www.dsny.com.
Current wording
Our corporate website is located athttps://investors.dsny.com/
Previous 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.
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 tested monitoring uptime, customer acquisition activities and added functionality for sale at scale. The beta version of the platform initially monitored digital broadcasts of 800 stations in Canada.
Previous wording
Destiny is currently developing additional functionality and complimentary services that are expected to expand the Company's addressable market, or act as catalysts to the Company's sales activities for Play MPE®. These are described more fully in business development section of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed on November 28, 2023.
Current wording
Destiny is currently developing additional functionality and complimentary services that are expected to expand the Company's addressable market, or act as catalysts to the Company's sales activities for Play MPE®. These are described more fully in the business development section of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed on November 28, 2023.
Previous 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%.
Current wording
Total revenue for the three months ended May 31, 2024 was $1,155,442 compared to the revenue of $1,068,007 for the three months ended May 31, 2023, an increase of 8.2% period over period. After adjusting for foreign exchange rates, the Company's revenue for the three-month period grew by 8.5%. The growth in revenue for the quarter arose from both our Major Label customers (increase of 10.7% quarter over quarter) and independent labels (increase of 5.5% quarter over quarter).
Previous 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.
Current wording
Gross margin for the three months ended May 31, 2024, was 87.0% of revenue, compared to 87.5% for the three months ended May 31, 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 May 31, 2024, our gross margin remained relatively unchanged compared to the same period last year, indicating that the growth in the cost of sales has kept pace with the growth in revenue.
Previous 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:
Current wording
Operating costs during the three months ended May 31, 2024 increased by 5.7% to $884,607 (May 31, 2023 - $836,795). The increase in operating costs was primarily the result of the following:
Previous wording
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software for the three months ended February 29, 2024 and February 28, 2023.
Current wording
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software development salaries for the three months ended May 31, 2024 and 2023.
Previous wording
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 wording
The increase in wages and benefits is partly due to a lower amount capitalized to software under development intangible assets in the current period. During the comparative period, the Company capitalized the development of its new product, MTR™, which launched in beta in Canada in the fourth quarter of fiscal 2023. Following the launch, there has been a reduction in the capitalization rate of these development costs.
Previous 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).
Current wording
Interest income earned on the Company's mutual funds was $13,685 for the three months ended May 31, 2024 (May 31, 2023 - $9,593).
Previous wording
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 wording
Total revenue for the nine months ended May 31, 2024 increased by 10.3% to $3,296,582, compared to $2,987,786 for the nine months ended May 31, 2023. After adjusting for foreign exchange rates, the Company's revenue for the nine-month period grew by 9.4%. The revenue increase in the nine months ended May 31, 2024 was driven by both our Major Label customers (increase of 8.6% period over period) and independent labels (increase of 11.9% period over period).
Previous wording
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 wording
Operating costs during the nine months ended May 31, 2024 increased by 16.8% to $2,634,466 (May 31, 2023 - $2,256,388). This rise can be primarily attributed to the following factors:
Previous wording
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 wording
For ease of reference the following table has been prepared to present operating results had the Company not capitalized software development salaries for the nine months ended May 31, 2024 and 2023.
Previous wording
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 wording
The increase in wages and benefits is due to a lower amount capitalized to software under development intangible assets in the current period. During the comparative period, the Company capitalized the development of its new product, MTR™, which was launched in beta in Canada in the fourth quarter of fiscal 2023. Following the launch, there has been a reduction in the capitalization rate of these development costs.
Previous wording
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).
Current wording
Interest income earned on the Company's mutual funds was $40,672 for the nine months ended May 31, 2024 (May 31, 2023 - $26,038).
Previous 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).
Current wording
During the three and nine months ended May 31, 2024 the Company reported a net income of $134,476 and $253,980, respectively (May 31, 2023 -$107,052 and $364,042, respectively).
Previous 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.
Current wording
For the three and nine months ended May 31, 2024, adjusted EBITDA was $219,910 and $505,011, respectively (May 31, 2023 - $172,726 and $560,844, 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 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%.
Current wording
As at May 31, 2024, we held $1,390,887 (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 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.
Current wording
At May 31, 2024, we had working capital of $1,820,539 compared to $2,185,960 as at August 31, 2023. The decrease in our working capital was primarily due to operating results.
Previous 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.
Current wording
Net cash provided by operating activities during the nine months ended May 31, 2024 was $291,047 (May 31, 2023 - $507,816). 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 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.
Current wording
Net cash used in investing activities for the nine months ended May 31, 2024 was $422,965, compared to cash used in investing activities of $708,945 for the nine months ended May 31, 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 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”).
Current wording
Net cash used in financing activity during the nine months ended May 31, 2024 was $470,271 (May 31, 2023 - $4,463) - this cash was used to repurchase and retire 459,200 shares of common stock (May 31, 2023 - 5,685) 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 and six months ended February 29, 2024.
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 nine months May 31, 2024.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31, 2024 AND 2023
Rearranged previous paragraphs (1)
Previous report — wording carried 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.