D-BOX Technologies Inc. (DBO.TO) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of D-BOX Technologies, Inc. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Foreign Language]. It is now my pleasure to turn today's meeting over to Brigitte Bourque, D-BOX Chair of the Board. Ms. Bourque, the floor is yours.

[Foreign Language]. Welcome to the Annual and Special Meeting of Shareholders of D-BOX Technologies, Inc. The meeting will now come to order. Portions of the meeting will be conducted in both English and French. [Foreign Language]. As indicated in the cautionary note displayed on screen prior to the opening of the meeting, today's presentations and discussions may contain forward-looking statements These statements are based on assumptions and are subject to certain risks and uncertainties. Please refer to our annual information form for the fiscal year ended March 31, 2025, and to other documents available on our SEDAR+ profile. My name is Brigitte Bourque. I am the Chair of the Board, and I will chair the meeting. With the consent of the meeting, I will ask Daniel Le Blanc, Vice President, Legal Affairs and Corporate Secretary of the corporation, to act as Secretary of the meeting. Also, with the consent of the meeting, I will ask Patrick Gauthier of Computershare Investor Services, Inc. to act as scrutineer to report on the shareholders present in person and the number of shares represented in person or by proxy at this meeting, to compute the votes at this meeting and to report thereon to me as Chair. Here with me, we have Naveen Prasad, our President and CEO, David Reid, our CFO; and Daniel Le Blanc, our Vice President of Legal Affairs and Corporate Secretary. First, a few words about procedures for this meeting, as it is being held in a virtual format via a live webcast. There are several matters to be dealt with at this meeting. To expedite matters, I have arranged for certain persons to propose and second the various motions. Questions in respect of a motion can be submitted by any registered shareholder and duly-appointed proxy holders who have obtained a control number. To do so, please click the question icon at the top of the voting platform page, type in your question in the text box at the bottom of the messaging screen and then click the send button. Our moderator will review the questions and send to review for the Chair to address them during the meeting. When asking a question, please indicate your name, which entity you represent, if any, and confirm that you are a registered shareholder or a duly appointed proxy holder. For the purposes of the meeting today, Voting on all matters will be conducted by electronic ballots using the Computershare online platform. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item. Voting can be completed at any time from now until the end of the formal portion of the meeting. If you have already voted by proxy, you do not need to vote again and no further action is required on your part. If you do vote again, your proxy vote will be revoked and only your vote at the meeting will be counted. Every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on and held by that shareholder. Based on proxy forms submitted prior to the meeting, I can report that all matters to be considered today have a requisite level of approval for adoption. Fiscal 2025 was a truly transformative and record-setting year for D-BOX. We achieved record full year revenue and profitability, a testament to the growing global demand for our premium haptic experiences. [Foreign Language]. Our momentum was clear throughout the year with record-breaking results in our second and third quarters. I am pleased to highlight this impressive trajectory has continued into the new fiscal year with our first quarter of fiscal 2026 showing record royalty revenues and a strong net profit of $2 million. [Foreign Language] This financial success is built on significant operational achievements. A major highlight were surpassing 1,000 D-BOX cinema screens worldwide. This footprint expansion and the subsequent royalties it generates is a key contributor to the company's profitability. In sim racing, we renewed our prestigious FIA licensing rights, cementing our leadership in the high-fidelity motorsport experience. [Foreign Language]. In order to accelerate growth and better align the company to shareholder values, the Board has been reconstituted with three new independent members. This began last September with the election of a slate of highly experienced directors, bringing fresh perspectives to the boardroom. We have achieved efficiencies in Board composition, transitioning from 7 Board members to 5 while maintaining overall impact and effectiveness. As part of this streamlining and addition to depth of expertise, we were pleased to welcome Lori Tersigni in June. We then furthered our commitment to accelerate growth by confirming Naveen Prasad as President and CEO and promoting David Reid to Chief Financial Officer. [Foreign Language]. We will now proceed with the formal portion of today's meeting. The agenda appears on your screen. Following this, we will invite Naveen Prasad, the CEO of D-BOX, to present the highlights of last year and what is coming our way in fiscal 2026. The scrutineers have submitted their report showing that the quorum has been reached, and they confirm that 51.46% of the holders of the outstanding common shares of the corporation are present or represented at this meeting. Therefore, I declare this meeting duly called and constituted to deal with any matters appearing on the agenda. The Corporate Secretary of the corporation will file the report of the scrutineers with the records of this meeting. The purposes of today's meeting are set out in the management proxy circular of the corporation dated August 14, 2025, and will be further described shortly. The notice calling this meeting, the management proxy circular and the form of proxy have been mailed to the corporation's shareholders. Our transfer agent, Computershare Investor Services, Inc., has attested to the proper mailing of the notice calling this meeting. There has been filed with me proof of service of such mailing provided by the corporation's transfer agent. I direct that a copy of such proof of service be annexed to the minutes of this meeting. With the consent of the meeting, we will dispense with the reading of the notice. Copies of the management proxy circular and other meeting materials are available under the corporation's profile on the SEDAR+ website. Also with the consent of the meeting, we will dispense with the reading of the minutes of the last meeting of shareholders held on September 25, 2024, and I direct that the minutes of the last meeting of shareholders be taken as read and approved and that they be signed as being correct. We will start with the formal portion of the meeting for the purposes of receiving the consolidated financial statements of D-BOX for the fiscal year ended March 31, 2025, and the auditor's report thereon, electing directors appointing Ernst & Young LLP as auditors and authorizing the directors to fix their remuneration and adopting a resolution approving and ratifying the creation of an omnibus long-term incentive compensation plan providing for the issuance of equity-linked securities. The first item of business on the agenda for today's meeting is the presentation of the audited consolidated financial statements of the corporation as at and for the fiscal year ended March 31, 2025, together with the auditor's report to the shareholders thereon. Copies of such documents have been mailed to the shareholders who requested such statements, and it is not proposed to read them to the meeting. We will now present each resolution that is submitted to the vote by electronic ballot. As a reminder, please note that only registered shareholders and duly appointed proxy holders will be asked to vote on each business item. The next item of business and first resolution to be voted on is the election of directors. Directors to be elected by the shareholders of the corporation shall hold office until the close of business of the first Annual Meeting of Shareholders of the corporation following election or until their successors are elected or appointed. I declare the meeting open for nomination and ask Daniel Le Blanc to present his nominations.

I am Daniel Le Blanc, Vice President of Legal Affairs and Corporate Secretary of the Corporation and a shareholder. I nominate Brigitte Bourque, Daniel Marks, Dave McLurg, Naveen Prasad; and Lori Tersigni as Directors of the corporation to hold the office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a Director of the corporation.

The bylaws of the corporation include a requirement that shareholders provide the corporation with advanced notice of and details about any proposal to nominate directors for election to the Board at a shareholders meeting. No such notice was received by the corporation. Accordingly, I declare the nominations closed. I move and ask our CEO to present his motion to elect the directors.

I'm Naveen Prasad, President and CEO of the corporation and a shareholder. And I move that the 5 nominees be elected as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

I am Daniel Le Blanc and I second the motion.

Are there any questions regarding the motion? We invite you to vote now. You need to cast your vote for each proposed nominee. The next item of business is the appointment of auditors of the corporation for the ensuing year and to authorize the directors of the corporation to fix their remuneration. I ask Naveen Prasad to present this motion.

I'm Naveen Prasad, CEO of the corporation and a shareholder, and I move that Ernst & Young SRL, chartered professional accountants be appointed auditor of the corporation to hold office until the next Annual Meeting of Shareholders and that the directors be authorized to fix their remuneration.

I am Daniel Le Blanc. I second the motion.

Are there any questions regarding the motion? We invite you to vote now. [Voting]

Thank you. The next item of business is the adoption of a resolution approving and ratifying the creation of an Omnibus long-term incentive compensation plan providing for the issuance of equity-linked securities. This resolution was annexed to the management proxy circular of the corporation dated August 14, 2025, as Schedule A. Before we proceed to the vote, I would like to provide some context for this important proposal. On August 13, 2025, after a thorough review of current best practices, the Board of Directors adopted this new plan to create a more modern and flexible long-term equity incentive program. The primary goal is to effectively recruit, motivate and retain the top talent necessary to maximize long-term shareholder value. If approved today, this new Omnibus plan will replace our current 2015 stock option plan and our separate DSU and RSU plans. Those older plans will become legacy plans, meaning they will continue to govern awards that have already been granted, but no new awards will be issued from them. The key advantage of the Omnibus plan is its flexibility. It allows the corporation to grant a broader range of awards, including stock options, restricted share units and performance-based share units. This enables us to better align compensation directly with the corporation's performance and adapt to evolving business goals and market practices in line with recommendations from proxy advisory firms. Like our previous plan, the Omnibus incentive plan is an evergreen plan. As required by the Toronto Stock Exchange, evergreen plans are subject to ratification by shareholders every three years. The maximum number of Class A common shares that can be issued under this new plan remains unchanged at 10% of the issued and outstanding shares. I ask our CEO to present his motion.

I'm Naveen Prasad, CEO of the corporation and a shareholder. Be resolved that the resolution, the full text, which appears on your screen, approving and ratifying the creation of an Omnibus long-term incentive compensation plan be and it is hereby approved.

I am Daniel Le Blanc, and I second the motion.

Are there any questions regarding the motion? We invite you to vote now. As we mentioned, voting today is conducted by electronic ballots for registered shareholders and duly appointed proxy holders. We will provide registered shareholders and duly appointed proxy holders approximately 30 more seconds to complete the electronic ballots. Computershare will then close the polls. [Voting]

Thank you to our scrutineers for this report, and thank you to our shareholders for taking the time to participate and vote at the meeting. I would now ask that the scrutineers compile the final report regarding the results of voting on all business matters. The results of the voting will be announced in a press release in accordance with the policy of the TSX and filed on SEDAR+. As there is no further business to come before the meeting, I declare that this meeting is terminated. I will now turn the meeting over to Naveen Prasad, the CEO of D-BOX for a presentation of the highlights of last year and an outlook on fiscal 2026. [Foreign Language]

Good morning, everyone. Thank you for being here. In our presentation this morning, I will provide an update on our strategic focus and discuss recent changes made to better position D-BOX for our next phase of growth. Then I will briefly discuss financial performance for both fiscal 2025 as well as the first quarter of fiscal 2026. Although fiscal year 2025 was a record year for D-BOX in terms of revenue and profitability, a strategic shift was necessary to demonstrate to investors the strength and value of the company. The company's history has been marked by frequent strategy changes and a focus on product development. The new executive team is committed to fostering stability and strategic focus and alignment between the key success factors of the company and its investors. To this end, the compensation of certain key executives has been aligned with equity performance. This insurance that shareholders and the company are appropriately aligned in their interest. Furthermore, the corporate identity of D-BOX has been solidified. D-BOX is a leader in immersive haptic experiences, and the driving force behind its success is the haptic software and artistic excellence created for each type of media. Our objective is to highlight that excellence by leveraging hardware to sell haptic software rather than the other way around to grow recurring revenue streams and maximize profitability by retaining recurring revenues, ultimately to be able to maintain the confidence of our investors and demonstrate the value of this great company to the market. Long-time investors of the company may note that in the past, the company prioritized developing products that did not generate reoccurring revenues. As a result, these products did not showcase the continuous improvements to the haptic software and excellence that this company has to offer. Our objective going forward will be to transform D-BOX conventional business model. We will continue to sell products as they are the vehicle for experience in haptics. However, more importantly, they have the vehicles for generating recurring revenue based on the ongoing perfection of our haptic craft. Internal assets and resources will continue to be aligned to achieve our goal of monetizing our haptic experiences through recurring revenue models. We will be looking to maximize the value creation from our existing infrastructure and only adding or investing in assets that bring incremental value to D-BOX's offering. D-BOX is in a great position, unprecedented in its history, having achieved profitability two years ago and building on our profitability in fiscal 2025, we are building from a place of strength. With over $10 million at the end of Q1 fiscal 2026, D-BOX has financial flexibility like never before. It will be important to maintain our investments in profitable opportunities that have contributed to the success. Reoccurring revenues have been a key to that success, reaching $11 million in fiscal 2025, the right for use, rental and maintenance revenues are finally showing signs of scaling alongside the growth of the theatrical footprint. D-BOX is committed to the growth of these types of revenue streams, revenues that position the company for long-term profitability. We believe that there are other opportunities for a highly profitable recurring revenue models that showcase our haptic experiences. We will be evaluating those opportunities in short order to determine their viability from a commercial and market readiness perspective. As I mentioned on the previous slide, we have a lot of things going on for us right now. To ensure a sustainable future, D-BOX must focus on activities that generate profitability, activities that expand our customer base across all of our customer groups, activities that expand our theatrical footprint to expand our existing royalty revenues as well as other reoccurring revenue opportunities. However, it is essential that we adopt a methodical approach to growth, focusing on cost control and ensuring the effective allocation of our assets to achieve our objectives. Maximizing the retention and reinvestment of our reoccurring revenue and profitable activities will facilitate our continued growth and success. Our robust system sales in all three customer groups allow for economies of scale, which would not be possible otherwise. They also contribute to overall brand awareness and the extent that our premier motion and haptic company is capable of. As previously announced, David Reid has been promoted to Chief Financial Officer. Sebastien Boire-Lavigne has been promoted to Chief Product and Technology Officer, and we began to search for a Chief Commercial Officer. Three roles that will be essential to ensure that all internal resources are working effectively to advance these synergies between technology, system sales, recurring revenues generated and maximization of profitability. We are committed to regularly evaluating our capital allocation strategy with the objective of enhancing shareholder value, though no definitive plans have been established at this time. We will perform our due diligence to ensure that any potential option demonstrates a net positive return for investors before committing to the option. During fiscal 2025, D-BOX generated nearly $5 million and ended the year with $7.8 million in cash. This feat was achieved by a 27% increase in rights for use revenues, which increased from $8.7 million to $11 million. The royalty increase outpaced the screen footprint growth, which saw D-BOX increased screens 9% from the beginning of the 2025 fiscal year. This increase drove net profit, which increased nearly threefold from $1.1 million to $3.9 million. For the first fiscal quarter of 2026 ended June 30, cash ended well over $10 million, with $2.6 million generated in the quarter. Rights of use increased 64% to $4 million from $2.4 million in the previous year. The increase is due to the year-over-year footprint increase of 12%, along with the strength of the gross box office, which rose domestically by 37% compared to last year. Net income improved to $2 million from a loss in the previous year. The indicators when combined with the growth in system sales during these two periods is just an increase in traction that we at D-BOX are very excited about. We hope you share our enthusiasm, and we look forward to our future interactions. To ensure all shareholders' questions are thoughtfully addressed. We encourage you to send them to us by email. We are committed to providing you a timely response. In closing, I want to thank the Board of Directors for their commitment and focus as well as the staff of D-BOX, my colleagues who bring passion and excellence to everything they do. Thank you.

Thank you, Naveen. This concludes our 2025 Annual and Special Meeting of Shareholders of D-BOX Technologies, Inc. Thank you very much for your attention and support. [Foreign Language].

This concludes the meeting, you may now disconnect.