Destiny Media Technologies Inc. (DSNY) Earnings Call Transcript & Summary

Thank you for joining us on the call today. Before we begin, I'd like to announce that we will be referring to today's earnings release, which was sent to the newswire 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 results -- actual results to differ materially from those forward-looking statements. Such risks are fully discussed in the company's filings with the SEC and SEDAR, and the company does not assume any obligation to update information contained in this call. During this conference call, 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 now would like to turn the call over to Sam Ritchie. Please go ahead.

Thank you. Welcome, everyone. Thanks for joining us today. I'm going to talk about the results for 2020 before handing over to Fred and Glenn. We closed out 2020 with high activity levels, with fourth quarter revenue of $1.032 million and full year revenue of $3.825 million. Play MPE currency adjusted revenues increased by 5.3% for the fourth quarter and 2.6% year-over-year. For the quarter, foreign currency fluctuations boosted our Play MPE revenues by 2%. However, annual foreign currency fluctuations reduced the overall positive impact to our Play MPE revenues for the year by 1.4%. We continue to experience strong growth in our independent label revenue with a foreign currency adjusted increase of 42.2% for the fourth quarter and unadjusted for 45.7% and an annual increase of 17.3% for the year ended August 31, 2020, or in an unadjusted increase of 16.3%. Our annual independent growth for the year was partially offset by adjustments to pricing with a long-standing major label customer in the U.S. And in Australia, one major label customer switched to a different system. U.S. independent revenue increased by 40.8% in the fourth quarter to approximately $437,000 from $310,000 in the same period in 2019. Annually, U.S. independent revenue grew by 15% to approximately $1.43 million from $1.243 million for the year ended August 31, 2019. In the quarter, global independent revenue increased by approximately $152,000 from $358,000 for the same period in 2019 to $521,000 in 2020, an increase of 45.7%. Year-to-date, global independent revenues increased by 16.3% or $239,000 to $1.71 million from $1.471 million in the prior year. Gross margin for the fourth quarter and for the fiscal year remain consistent at 92%. Overall, expenditures increased by 15.2% for the year ended August 31, 2020. Of this increase, $280,000 or 9.6% is a result of onetime restructuring costs and $163,000 or 5.6% relates to increased investment in our technology and business development. Adjusted EBITDA for the fourth quarter grew by 27% to $203,000 compared to $159,000 for Q4 2019. For the year ended August 31, 2020, the EBITDA decreased to $329,000 due to onetime restructuring costs and investments in product development for longer-term accelerated growth. Working capital has declined due to the completion of the normal course issuer bid, totaling approximately $533,000, and also due to the adoption of a new lease accounting standard, which requires a recognition of obligations under our current capital leases. As at August 31, 2020, we had cash reserves of $2.622 million and had working capital of $2.424 million. I will now pass you over to Fred.

Thanks, Sam. Before Glenn gets into our business development activities, I'm going to take a step back and talk about our goals, a little bit of the forest-before-the-trees discussion. And I'll talk about our goals and how we plan to get there. And I think this will set a context on why I think 2020 was a really successful year. Our first goal is to acquire a much larger market share to expand globally, do what we do but do it in more territories. As we do that, our product people and myself are investigating ways to expand services, to expand what we see as our addressable market. This is really our second goal. We think there are tremendous opportunities. But for the most part, over the last little while, we have prioritized on positioning for growth of our core platform. We focused the company's efforts back on Play MPE at the beginning of 2018 with this first goal in mind. Since that time, we have grown revenue by 11.5%, but that growth really has preceded all the various things we are doing to accelerate growth and expand to new territories. There are really 2 distinct ways to grow the current Play MPE platform: that's growth in areas where we have a significant presence, what we call a network of use; and the second is to acquire new territories. And how we approach those are quite different, so I would like to explain a little bit more about that. Growth in areas where we have an established presence comes from block-and-tackling sales, better marketing, greater lead generation, greater lead conversion, good customer service and later on, as we add more services, we'll have more salable products. We have seen independent growth in the U.S., for example, grow by an average of 10% -- more than 10% quarter-over-quarter over the last 10 years and has, in fact, grown in every quarter but 3. To grow in areas where we have a presence, we create and sell recipient lists. We do this in every territory where we have a significant presence. You'll see that our indie revenue is up significantly in Q4, and Glenn will talk a little bit more of the why of this. We have made significant improvements to our marketing efforts. And to scale this market efficiently, we are moving towards a very user-friendly, self-serve checkout system. Adding a new territory is a little different. It requires a specific strategy catered to each market, a more thoughtful strategy and a little bit more patience. Within each territory, typically a country, that strategy is catered, but it has some commonalities. The market generally lends itself to a single dominant system as recipients generally want one place to go. While this is true, this is not always what we encounter. Sometimes we encounter a significant competitor, sometimes it's a very fractured market. But generally, our strategy is to engage customers, demo the system, obtain trial use, engage recipients and obtain activity. And then we just rinse and repeat and grow that network of use until we can commercialize it once we have demonstrated value. To do that, it requires a good -- a few things: a good system; quality business development people and marketing tools; and internal collaboration between operations, marketing and business development. These things are where I think we've made a tremendous step forward this year. In 2018, when we refocused our efforts on Play MPE, Play MPE was a very feature-rich and powerful platform, but it was PC only-based and required training to use, so it was powerful but not user-friendly. This limited our ability to add territories. Since that time, we moved to an Internet-based platform. And just in October this year, so actually, after year-end, we released a new version of our release creator that is more intuitive, and accessing the more powerful features is readily available to nascent users. To get here is not an accident. It requires a great product team. 17 months ago, we hired a new product -- Director of Product. In September of 2019, we hired a new Director of Engineering. And in February of 2020, we hired a new Senior Product Manager. Collectively, we are getting much more current technical knowledge, better development processes to improve our output and a great collaboration within our team. Our business development group underwent a significant restructuring, Glenn will talk a little bit more about that. But part of that reorganization was hiring our first Director of Business Development, which is Glenn, and he joined us in April this year. We also hired a new Marketing Manager, and we are working to develop tools to assist in demonstrating the values of Play MPE so our lead conversion will increase. When adding new territories, we have several advantages. We can say confidently that we are the best platform out there. We just need to execute on sales. In new markets, universal use generally opens the door. A great system is internally reinforcing. For example, in Canada, we have an entrenched competitor, but we started with universal use in January of 2020. We've seen that use expand, and now we're seeing recipients voice their preference for our system. But I'll let Glenn get more into that, and I'll turn it over to him.

Thanks, Fred. Hello, everybody. As you may recall from the Q3 call, there was a major restructuring of the business development group in the middle of the year, as Fred was just mentioning. I was hired in the role of Director of Business Development in April, early in the pandemic restrictions. And we began to build up a team with additional inside sales staff and added a reseller in South Africa. I should also note that in Q1 of 2021, we hired a Miami-based Senior Account Executive to continue to expand our Latin initiative, which I'll speak to in a few minutes. Moving forward, we look to expand our sales efforts and add new territories to the strategic recruitment of business development staff and/or adding additional reseller agreements. The pandemic has changed how we approach customers. As we've shifted to a virtual customer engagement strategy to establish and strengthen relationships with industry promoters, record labels and other key industry contacts, I'm proud of our team for embracing and flourishing in what feels like the new normal. We know artist touring is on hold. But in fact, the COVID-19 restrictions may actually be increasing content production as we saw notable growth in Q4 on several fronts. A send within the Play MPE platform is defined as a song or a group of songs, I'd say bundles or albums, sent to an individual recipient. We saw an over 15% year-over-year increase in sends in fiscal year '20, with an increase of almost 20% in Q4. This improvement in sends comes from an increase in commercial use and adding seeding use, which should have a positive impact in revenue over time. We've seen an increase in prospective customer inquiries of almost 9% over the previous fiscal year, with a notable increase of 24% in Q4. And as Sam mentioned, Q4 currency adjusted revenue was up 5.3% year-over-year. A little over 45% of our revenue comes from independent record labels and artists from new territories like South Africa, the U.K. and Canada but also in existing territories where usage is strong. Our indie revenue continues to show impressive growth, particularly in the U.S. Since Play MPE commenced U.S. independent revenue in fourth quarter of 2007, it's grown, as Fred mentioned, an average of 10.4%. Q4 of 2020 produced over 40% year-over-year increase in revenue from such U.S. independents. So why is this? What we do know is that we have better lead generation, lead conversion. What's a little more challenging is to figure out what we're doing right. We're looking at this in detail so we can consistently repeat. What we do know is that we are improving our business development team. We're improving marketing efforts with a more logical and systematic approach. We have an improved product on both the Caster and the Player side of our platform. We have longer established use in new territories like Canada and South Africa. And there could be market-related issues like COVID where artists have been creating and putting out more content. The upshot is that I think all of these are true. And the impact on our indie revenue -- and the impact on indie revenue growth, we are continuing to recruit business development resources, whether resellers or staff, and we are continuing to enhance our marketing efforts. Our reorganized biz dev group is well trained driven and coordinated with our operations, product, finance and engineering teams. As Fred mentioned, we are leveraging more senior business development staff to aid in the new territories. In 2020, we launched a few new initiatives. Canada has been serviced by a local system, primarily in English, for a number of years. Play MPE saw an opportunity to displace this ingrained system that suffered from a lack of investment and user frustration with our stronger, easier-to-use distribution tool. Our list management team completed an in-depth review, an update of our recipient list to include all relevant radio personnel. We formally launched our Canadian initiative in January 2020 as Universal Music Canada commenced distribution of all releases within Canada, some of which are exclusive to our platform. In March, we expanded this use to a second major label. Throughout the year, we continue to add usage by major independents and recipients at major conglomerates, such as Bell Media, Corus, Patterson, Stingray and others. Whether Play MPE will be successful in the Canadian market or not will depend on whether the superior user experience and functionality of the Play MPE platform and our customer relationships will outweigh the effort of changing established customer recipient behavior. We're very optimistic, and we've seen consistent growth of usage throughout the year and, in particular, in Q1 of '21. We're very excited about our Latin music segment, which is huge, active and lack an entrenched competitor. In 2020, we restructured and expanded our U.S. recipient lists and launched our list in Mexico. We translated our Caster platform in Spanish to complement our Spanish-language Player. And over the course of the year, we began seeding content from Universal Music Latin Entertainment and several independent record labels. We introduced our Player platform to various recipients of key radio groups to begin engagement. We expect this market to add significant revenue, and we believe that the recent hire of our senior account executive in Miami will expedite our systems adoption and help us move quickly into Latin territories beyond the U.S. and Mexico in 2021. We continue to focus attention to South Africa, a country with a population of almost 60 million, 11 official languages and a flourishing music scene. Play MPE added Warner Music's South African trial usage to the existing use of Universal South Africa. Late in the year, we formed a reseller agreement with Johannesburg-based Stamp Communications who bring a depth of industry contacts and regional knowledge. We're very pleased with the progress and, in August, commenced our first independent label sales in South Africa. We expect this revenue to grow significantly in '21 and, again, leveraging our Universal Music usage to expand further into the sub-Saharan market. Late in the year, we focused more efforts on expanded use from major independent record labels. These differ from the 3 major record labels due to their size and from smaller independent labels due to their international footprint. Many of these major indie labels use Play MPE in established territories. Our approach is to obtain introductions through satisfied customers and leverage Play MPE's global label features. The superior features of our platform such as release sharing and permissions are attractive to these major indies who lack the resources to develop their own internal systems. We've seen positive results getting numerous introductions, training sessions and some trial use. While we believe we currently have the largest worldwide market share for promotional distribution of music, we estimate Play MPE holds less than 10% of the addressable market. In 2021, we'll continue to work strategically to increase this market share in established regions and look to expand our reach to new territories such as Latin American markets in Central and South America and potentially into sub-Saharan Africa. In conjunction with our product team, we are refining our strategies and relationships in other verticals such as DSP distribution, which stands for digital service provider distribution, and reporting tools. The company sees tremendous opportunities in ancillary and complementary services such as these. And with that, I'll pass the call back to Fred.

Thanks, Glenn. Because we released our results early in the morning, I get the opportunity to receive a lot of questions throughout the morning. And I thought I would -- before we turn it over to questions, I thought I would preempt some of them. So one of the questions we got was to shed a little bit more light on what happened in Q4, specifically with respect to -- we saw indie label revenue grow by more than 40%, but total revenue grew by 5%. Sam shed a little bit of light on this, and we've talked about this in previous quarters. We did have a loss of one customer in Australia, and we adjusted the pricing for a major label customer in the U.S. And this is kind of long overdue, the pricing restructure in the U.S., it was to be more in line with commercial rates. The loss of the customer in Australia was because they have an internal champion for a system that is used only by this customer. We hope to retain that. That adjustment will work its way through Q1. So beyond Q1, I think our major label revenue will grow from there. We see other major label use growing, and we see a lot of trial use with that same major label in other territories. So it's not something that I'm particularly concerned about. We do see the indie market growing faster, though, that's where we think we can really grow revenue. Another question is talking about churn. Churn is how quickly you lose customers or whether you lose customers. And that's difficult for us to measure because we are -- we differ from a lot of SaaS-based companies in the sense that we don't have monthly recurring fees from a customer necessarily or not all of our customers. We get fees when they use the system, when they have a particular release. It doesn't -- at least with the services we currently provide, monthly recurring fees are isolated to our enterprise customers. So trying to figure out what an average customer pays us and what our churn rates are is not something that can be easily applied to us. Suffice to say, we received a lot of new customers this year, but I think we'll have to provide better metrics on that or metrics that will allow people to figure out whether our indie label revenue will continue. We are seeing really a strong growth. And I think, as we can expand that strategic use in a new territory, we will continue to grow indie revenue. Another question was on the self-checkout system. That's where we can really scale indie label revenue. Right now, they are primarily serviced by our operations team. We will -- we're still working on priorities of which product feature we build first. I don't see this on the -- within a year. But we will plan that to be finished at the same time. We are really scaling up use in new territories. So I think they'll meet each other quite nicely. Another question was on director nominations. Some of you may have noticed that a new slate of directors was nominated by the former CEO. The company and our external counsel is still reviewing that nomination to see whether it was done properly. The former CEO says he owns 12% -- sorry, sold 12% and retains 9% of the outstanding stock. I don't believe this. It appears that he had sold substantially more than that. But his motivations, he's been pretty clear about what his motivations are and they're very self-serving, so we will likely articulate those facts if the time -- at the appropriate time. Regardless, I think it's highly unlikely that those nominations will be successful. Probably the most frequent question I get asked is about the buyback. Some of you may be aware that we repurchased 5% of the outstanding shares last year. And I want to articulate about how we approach this decision. We evaluate the use of it -- of cash the same way no matter what the investment is, whether it's acquisitions or hiring new staff or doing a buyback. We -- at the end of the year, we had approximately $0.25 per share, when we're trading at $0.60, it's a substantial amount of our market cap. And our -- we're profitable, and our revenue is growing, so our cash balance is growing. I view the best return on investment right now is to grow staffing to increase use, which will lead to greater revenue. That's easily our best return on investment. And a buyback might send the wrong signal in that. But we are recruiting. And as Glenn said, we added an executive in Miami to assist in Latin music. These investments take time to achieve a return. We are currently investing a significant portion of our overall expenses in growth, whether that's product growth or business development resources. So given the choice, this is our best use of cash. Having said that, we need to make these investments in a responsible and coordinated way. We need to hire the right people at the right time, in the right area. So there are some limits on how quickly we can expand these expenditures while ensuring that they are done effectively. At the same time, our revenue is growing, and we are already profitable. So I think we can continue to grow that investment in staffing without creating a burn in -- on existing cash. And I think that will show up in revenue. Also it's obvious, with the addition of the reseller in South Africa, we can get an alternative to investing in staff is to hire resellers or come to reseller agreements. And we can do that without upfront cost. Admittedly, I like having a lot of cash in the bank, but it's not doing any work for us. 1% or 2% return is not what we're going for. So without committing to anything, I think we'll have a public announcement on the buyback very shortly. Another -- the last typical question I get is where do we see significant revenue growth or what is our -- where do we want to be in 5 years, those kinds of questions. And I think that we've seen some growth over the last few years, averaging about 3.5% or something like that. And that has a danger of misleading people into thinking that that's what we are going for. It's -- we've grown revenue in spite of the things that we are doing to accelerate growth. We've really done a great job, I think, improving our staffing. And that's starting to show up in improved product, improved lead conversion. And that is this thing that, I think, will start to accelerate growth. We're not here to achieve single-digit revenue growth. I don't really like predicting where we'll be in a year or 5 years or whatever because sometimes taking over the new territories takes time, and it tests the patience. The Canadian market we've been in, trying to turn over and starting really about a year ago where we started delivering with Universal, I think that will come to fruition very quickly. And those efforts are typically binary. We're either successful or we're not, and I think we will be. So it takes time to really add a new territory and grow a lot. But single-digit revenue growth is not what we're here for. It's to grow by a substantially larger amount. And I think I think that's all the questions that I had from this morning. So I will turn it over to anything that I may have -- any other questions that I may have missed.

[Operator Instructions] Your first question will be from [ Craig Johnson ].

I just wanted to ask a question about general and admin. It seems that for Q4, that number is considerably less than what it normally is of $200,000 or more. It's down at $89,000. And when I look at the MD&A, it looks as though wages and benefits have changed, have only gone up by about $5,000 -- or actually gone down by about $5,000. I'm just wondering if you could give some color on the reason why that's so low in Q4.

Sam might be able to provide a bit more color on this. General and admin is definitely something that can fluctuate a little bit based on foreign exchange gains or losses. We have accounts receivable. And if exchange rates go against us or for us, the general and admin can fluctuate based on that. Sam, do you have anything else?

Yes, yes, definitely. Yes, like, the Q4 G&A costs are lower. It's from the allocation of wages and salaries to the various parts of our business. So in Q4, that allocation was a little different than it had been previously. I think in Q3, the amount was a little higher. So in Q4, the amount was just -- is lower. There's no change to the number of positions in that. It's just the focus of their time switched a little more to operations or to sales and marketing.

Oh, I see, okay. So I see that sales and marketing went up a bit from a lower number in Q3 as R&D is just up a tad. So that's what it is. It's not anything specifically onetime, it's just a reallocation.

Just a reallocation of people's time in the fourth quarter.

We did have -- it's probably worth mentioning on the call, but we have a -- it's in the 10-K, and I would actually like people to -- if they have some time, take a read of the 10-K because we -- I think it reads a little bit more easily and describes what we are trying to do a little bit better than it has in the past. And I think describing what we do and why we're good at it is sometimes is a little challenging. But this will -- the 10-K really describes what our strategy is. It also tells a little bit about onetime costs as well, so you get a bit more flavor on that.

And your Next question will be from [ Brian Boyd ].

Just a great job on the past quarter and over the past couple of years. I just had a quick question around kind of your first comment about the restructuring of the agreement with one major label. How has usage for that major label compared year-over-year? I know revenues are down because of the pricing, but how has usage compared? That's it.

Okay. So the pricing for that was completely linear, so they wouldn't get any economies of scale. And that's really something that we try to engage them with to increase use. I think their use is relatively stable. I don't know that off the top, but I know the releases are still going through, and we're still getting the same engagement with them. In fact, one of the sub-labels signed a 2-year agreement with us that sort of gives us a little bit of certainty on revenue.

[Operator Instructions] And your next question will be from [ Andrew Taylor ].

Fred, just on the cash that's on hand, has there been any thought about maybe having like a small dividend at all?

It's an idea that's been brought up. I think that it likely not -- doesn't make sense for us to do that because of the decline in the share price. The -- I think the last thing we'd want to do is create a taxable dividend when you have a capital loss. The -- I think the value of the stock is, I think, artificially low, and it kind of goes back to my earlier comment about the former CEO selling a lot more than I think he's disclosed. I mean this is a question we get a lot, isn't he supposed to disclose. And the answer is absolutely, but he doesn't. So what the -- what our investors don't see -- don't have transparency on is that when you have 20% of the stock being sold over a very short period of time, and I'm talking a substantial amount this year, you don't get the sense that the decline in stock is caused by anything less than your typical demand and supply-type scenario. I think, ultimately, the revenue growth is going to be a real driver in the value of the stock. So we hope to, and our target is to accelerate revenue growth. That's everything we are working towards. So I think maybe like the stock is temporarily low, and I think that will appreciate, but I don't think it makes sense for us to do a dividend while the stock is at a low price point.

Okay, that's fair. Now just when you -- when Destiny tries to go to acquire or move into a territory that you're not, you want to be involved with initially or you are involved but not to the extent that you want to be, how long or what time frame do you -- does your business unit typically say, okay, we're going to allocate x amount of resources and time. And if we don't see the type of results that our expectations are, we're going to get out of that market. Do you factor that into your business development at all?

Absolutely. The -- yes. The -- that's not an easy question to answer, but -- and it really is contextual. So in Canada, we've really -- we hired a person to help us move into Canada. This is an example of how we approach the decision. And that we -- acquiring Canada as a market, we could potentially buy the market, acquire it or we could take it over. And so we go into it with a decision tree, well, we think that the cost of buying it far outweighs our cost of acquiring it through your strategy of business development. There's always a speed of acquisition as well. But through the course of the year -- it took a while, but through the course of the year, we added Universal and another major label shortly thereafter, and we've grown use by adding major independents. And I think that will shortly expand and include a third major, and then I think the Canadian market will switch over when that occurs. That is -- it's always -- it's never as fast as we want it to be, but changing the way people operate is sometimes a little bit -- it's nuanced. It takes some time. And you build up relationships, you demo the system and those things will help turn the market over. There's nothing -- and when I say we can quite confidently say we have the best platform in the world, there's no doubt in my mind about that, it's whether or not we can convince other people about that and be effective business developers, whether the price point is right. But I think once we reach a certain stage, there's nobody that can compete with us in terms of the investment in the system and in the quality of the system. There's literally -- when we go through our competitive analysis, there's nobody that would ever compete with us in terms of ease of use and in terms of functionality. And I think sometimes it just takes some patience. But once the market is acquired, we very rarely -- like, we don't lose it. We have bumps in the road. But that's, I think, in hindsight, when we didn't invest in the business development relationships and/or the product, but that's changing. And I don't foresee us to having downside risks. So once you -- I guess what I'm saying in marketing terms is our customer acquisition costs can be large when it comes to acquiring a new territory, but the average lifetime value of a particular territory or of a client is much larger.

Okay. So with the -- I believe the comment made earlier in this session was that there's a -- we currently have about 10% of the market. So what sort of -- like, what's holding the other 90% of the market back from moving towards us? Or -- and I'm not even going to say 90%. I would say, if I cut down in half to 45%, what -- like, what would it take for that 45% to come onboard?

Well, I don't want to rehash the history of it too much, but if you -- we grew at a very rapid pace, percentage-wise anyway. We grew -- through 2004 to 2007, we had that time to establish a use. We were -- at the time, we were converting people from CD deliveries to digital delivery. And that required patience and building up that network of use. And then all of a sudden, in 2008 through 2012 or whatever, we grew from virtually nothing to $4 million in revenue. But also during that time, we -- even though our revenue was growing, we were -- we stopped developing the platform. We moved to all sorts of different ideas that had nothing to do with plan B. We -- there was a lot of nepotism that went on and inappropriate skill sets and lack of collaboration. I just don't want to rehash all the history of it. But looking forward, if you go out into, say, the Latin market, for example, you go there with good quality business people, good quality business development people, that can build up relationships and you go there with a good product. If you look back even only a few years ago, we had a PC only-based platform that was challenging to train people on the use. It was very powerful for major record labels that establish that use. They could do all the things that they need to do. But we also needed to make it easy for people to use. And that's what we've done now. And that's why, I think, we'll grow now. And that's why I think adding these business development people now is going to end up in results. So you'll see that's fair. So you'll see that our use is starting to really grow. And a lot of those trials, but that will eventually turn into revenue. It's similar to what we were doing in the past. It's really we're repeating what we did in the past when we were successful, and I think we will be.

Next question will be from [ Jerry Wimmer ].

First of all, in the most recent quarter, is there any seasonality still in your revenues? Or when you look at that, do revenues mean higher quarter-over-quarter more business than seasonality?

Yes. The seasonality is always -- always shows Q1 as our best quarter, which is the quarter we're in right now, Q2 is our lowest quarter and then Q3 and Q4 tend to be relatively static. I think as we look forward, as we develop more true SaaS-based services that we can layer on into the platform, you'll see that we develop more recurring monthly fees, which will kind of smooth it out a little bit. So percentage-wise, you'll see less of a seasonality, but it's not really something that we worry about too much.

Okay. In looking at your Q4, you were 20% EBITDA margins. As revenues grow, do you think that EBITDA margin sticks or rises or falls? Or like, what can you give me on where that EBITDA margin will be, right now at 20%?

Okay. So that margin is after you consider 1x cost associated with restructuring. I know you're probably looking at Q4, but so there might not be that much in Q4 with respect to that. There's also a fairly significant amount that we are investing in growth. So that sort of hides what our true margins -- true total margins are. For example, I talked -- we talked about Canada and how we're going to acquire Canada, and I think we'll do that. That is all acquisition-based cost. So -- and I think one of the things we are thinking of articulating a little bit more clearly to our investors is really what -- when we take on salaries and wages, is it dedicated to growth or to revenue maintenance, and there's some judgment that comes into what that allocation is, but it's a significant portion. So looking forward, we are recruiting. We are recruiting development resources, so like software engineering costs, so we can -- we've really vastly improved our product team. And I say that, and I think our investors won't see that until we start to show a great cadence of new, really cool products. And -- but trust me, when I say that we've improved our product development team. And so to make use of those resources, we are adding engineering costs as well. And then we're also adding business development resources to further sale. So I think as we grow -- the long answer to your question is, as we grow our revenue, we will also be growing our costs to -- for growth. So our margins, while I still think we'll be cash flow positive and growing that cash balance, I think we'll be growing our costs to accelerate our revenue growth.

Should somebody be modeling 20% EBITDA margins or not?

Sorry, that was probably too long of an answer to your question. I think that's probably conservative.

Okay. So I shouldn't expect EBITDA -- adjusted EBITDA margins to drop significantly, if they go up, it's a bonus as revenues rise?

I think that's probably fair. I think, over time, you'll see a higher margin.

Yes. You earn $0.02 a share on 20% EBITDA margins and $1 million in revenues. If the ratios are consistent, obviously, profitability is going to grow as revenues go up.

That's right.

Okay. My second question is -- and I know some you already touched on in the questions -- prior questions. Can you give a little more color on how you expect to grow revenues into the double digits? You've done a nice job, it's a profitable company, but it's a public company with CAD 5 million or USD 3.7 million revenues. So obviously, on a very small base, you need at least double-digit revenue growth to trough any currency to your stock price as a public entity. Over the next 12 months, 24 months, are we going to see enough business development wins to increase to double digit? More significant, are we going to see acquisitions? Because I doubt without those -- without that, it's difficult to get interest in a public entity with such a small revenue base.

Yes, I completely agree with you. The accelerated revenue growth is something we are targeting. How do we do that? Like, for example, if we were to acquire the Canadian market, I think that probably puts 10% to our revenue growth right there. The time frame over acquiring that market is -- I don't know when we will do it, but it will be, I think, in the short term. I still predict that. I'm sure our friends in Toronto don't want to see that, but I think that that's just a foregone conclusion. But that would drop. So our revenue growth, I think, is it will come in chunks like that as we acquire new territory. The Latin market is huge. It's in the States. It's in Mexico. It's in Central America. It's in South America. And we have advantages to grow in those territories. And I think investing in resources to acquire that market is going to pay dividends for our investors. Whether -- the time frame on acquiring that is something that I find really challenging to predict, I would have thought the Canadian market would have switched over to us already, but we're -- every day, we're going in the right direction. Our usage numbers are up. We're getting more platform users that are really happy about the system. We're clearly a much better system. So I think seeing that revenue growth accelerate is something we see in the relatively short term. And I agree that that's something that will attract investment. I mean I think we're tremendously undervalued as it is. I mean we have almost 50% of our market cap in cash, and we're growing. We've got -- we've made really good acquisitions of staff. I think our product gets better and better every day. And I think the business development group especially is going to be more effective. I mean Glenn only joined us in April, but there's a lot of good things that have happened already.

My final question, I'm not sure if you can answer this or not, but the significant buying by one of your directors of stock on the open market, especially probably on the U.S. side, maybe that's the stock coming from your former CEO, but it sounds like he's getting large ownership. I just wondered if -- what should somebody lead -- think about that?

Well, it's actually not one of our directors, it's one of our directors' brother. They just happened to have the same last name, obviously. He has been buying. I -- what to make of it? Well, I think he has confidence in our approach. I mean he probably puts a little bit more eyes on the ball. I think he's patient. I think he agrees with the plan. I mean...

So the concentration of ownership is not something that investors should keep an eye on, I guess?

In a way that's concerning, you mean? Or...

Concerning us and concerning people can privatize, things like that. It's a small company. Just -- I see the filings almost every day. I'm not complaining about it. I know probably where the stock is coming from, just curious.

Well, I think -- I mean I think the thing that's hidden from a lot of investors is that the former CEO is I believe -- and his filings don't show this, of course, but I believe he's selling a massive amount. And that supply is -- absent a whole lot of great accelerated revenue, until that happens, I think people -- like, demand is going to be a little softer, but that supply is what's really hurting us. And I think he's just taking advantage of a low stock price. I mean he sees the cash. It's -- the most I've ever made on stocks have been when you wonder what the heck you're missing because it's so cheap, and I think that's what people should see with us right now. There's nothing you're missing aside from the big supply of stock from the former CEO. There's no -- our downside risk is non-zero but it's, I would say, pretty low. And I think our upside is just tremendous.

Next question will be from [ Lawrence Goldstein ].

I've got several questions. Absent in all of your discussion are words such as Far East, Middle East, can you comment on that? Is that your market? Are those your markets?

Yes. I think -- okay. So it depends on the territory. We'll grow. We have universal use in a lot of different territories. And I think that's our foot in the door, so we're concentrating on those territories first. But the -- we did translate our distribution site software into Japanese. We hope to make use of that.

Excuse me, there's a bigger market called China and India, and they do a lot of music in those places.

Yes. Well, that actually, I would say, South Korea is actually a very big market as well. To help us in those markets, I think, we probably need local business development people and resellers and/or resellers. The one thing about South Korea that might be a little different is the level of independent label use. So we talk about independent versus major labels, and major labels have the world's largest artists and possess the largest market share. But that character depends on the country you're talking about. In South Korea, for example, the major labels are much less present. So I think that actually helps us in South Korea. So if we move into those territories, although I understand that China is a huge market, I think South Korea and Japan are probably easier targets.

And what about the other countries? What about the Middle East?

Well, I mean, we do have actually a reasonable foundation of use in Israel. But it's all a matter of priorities. I think as we grow, we will -- we are starting off with...

So it's not on your target for the time being. Is that it?

I don't think there's anything that's not on our target list, it's just a matter of priorities. I think as we -- we just hired a new Director of Business Development this year. I think that to grow responsibly you had to start there. And I think as we set up departments or business development groups that we will be able to attack more territories. So it is on our target list. It's just -- the world is on our target list. And I think -- that's why I say our potential is tremendous. It's just a matter of prioritizing and growing responsibly.

Okay. You just had a brief discussion that touched on margins. So is it safe to say that for the next year and maybe beyond, that revenue growth is the focus? And I hate to put it this way, but to hell with margins, that's not in the immediate future. The focus is on revenues, and you're going to spend whatever you need to increase revenues at the most rapid pace. And so the bottom line is not of any importance to you for the foreseeable future, which I'm defining as the next year, at least. Is that correct?

I think I should have used it to answer the question, but yes, that's a much more succinct way of saying what I wanted to say.

Okay. And I'm just curious -- the wrong choice of word, I'm not curious. As an investor, I don't often hear somebody say the kind of words you just used, "We are tremendously undervalued. Our downside risk is -- I forgot the word you used but you meant little-- Our opportunity is great." I never heard a top executive say that, but it's delightful to hear you say it. But what do you base that on? What do you base that on, having cash of a few cents a share, having in front of you when you arise tremendous growth potential, which you seem to be defining as 20%, having 90% of the market not being yours and the world being your oyster? Although you don't seem committed to saying that you think you'll get to 20%, doubling it anytime soon, although you're optimistic about growing it. And you don't talk about profits. That seems like a dirty word. What makes you to say those phrases, "We're tremendously undervalued." What do you know about value? What do you know that undervalue? Or what makes you say that?

Well, I think that goes into what we see as the future. The -- I think my confidence comes from a few things. I think we have a worldwide agreement with -- I know we have a worldwide agreement with the world's largest record label. I think we are servicing their needs in a way that nobody else can. I'm not saying that it couldn't be duplicated or somebody else could build it, but it doesn't exist now. And I think if we do a good job of addressing their needs growing within their use, within Universal's staffing, we can leverage that into new growth. And I think with the improvements to our own staffing, we are really in a lot different place than we were a couple of years ago. And I think that's where the source of confidence comes from. I think the word I used for our downside risk is it's non-zero, which -- I mean there's always downside risks. Things can happen. But I don't see our use declining. I think we're the best system out there. It is a bit of a niche market, but we're the best at it. And I think we can afford to invest the most in it. I say we're less than 10% of the market, but we're also the largest, I think, single-serving supplier out there. It's a very fractured market outside of certain areas. And so I think the confidence comes from delivering a good, quality product. I'm not saying profit's not a -- profit isn't a dirty word, it's something I think that will -- it will just be inevitable. As we grow, we will -- our margins are good. They're strong. And I think if we execute properly, we will -- the profit will come.

How many other players are there in the other 90%? And how many of them are freestanding companies as opposed to being tiny players, a part of larger entities?

There's a lot. They range from -- they're all smaller. You have very fractured markets. They have one in Canada, for example, but they've really struggled to get outside of Canada. There's one in Germany. There's one in France. There's one in Spain. And they're generally isolated to these different territories. In the States, there's a few -- several probably. And -- but they have very niche presence. So we -- the market is really fractured. I think -- and it does lend itself to consolidation, and I've seen the platforms that are used in these different territories, and it's not good. Ours is really slick and easy to use and powerful. And I think as we -- that's always not -- it's something that I want to communicate to our investors a little bit that we're producing videos on what we do, and you'll see that we're good at what we do.

Well, are the others all -- you say you're the largest. The others are all much smaller. And so are there 70 or 80 others that are all solely in this business?

I mean I don't know the answer to that off the top, I haven't counted. But if you were to go through it, you would see a lot of them. And a lot of -- they range from an archival platform like ourselves, like a library or presentation of a music library or their delivery tools. And I think the former is much more effective. It tends to be a little bit more expensive. But you'll see a lot of variety of competitors.

But I still don't understand. The bulk of them you say are much smaller than you. So are there scores of them or dozens of them?

Oh, I would say dozens. I don't know off the top. I really don't. I mean I could probably name 30 of them in different territories. But...

And are they solely in this business, those 30?

Again, it would probably depend on where you're talking, but I think so, yes. For the most part, the ones that I can think -- like the one in Canada has -- they -- when they couldn't really move out of Canada, they went into a different market where they do other things. They do add deliveries and -- music video deliveries and things like that, that we don't do. But that's the only one that I can think of that I know that does other things.

I see. I'm just surprised that you are reticent to talk about how you can grow a hell of a lot faster when you make it sound like the competitors are really not worthy competitors. I don't understand why you don't feel like you could grow doubling and tripling in a period of -- a short period. I don't understand why. So I mean 20% is a big deal, I recognize that. But against weak competition, and you keep indicating you're so much better, I don't -- I fail to understand why you're reticent to say you'll grow like 100% a year. I don't understand why it's so difficult to gain a much bigger foothold hold much more rapidly. Why are you so reticent?

Well, okay. So first of all, it's changing people's behaviors. And there's a concept of a network of use. And so if you were to replace Facebook, for example, how would you do that? I mean you could produce a better...

They own the market. You have a tiny fraction of the market. In fact, they created the market.

Well, if you listen to the answer, I think it will help explain it to you. So in Canada, there's somebody that is a Facebook. There's a -- they have the market. So we come in and we want to displace them. That's an insular market, that's when I talk about the market being -- lending itself to a single dominant player. It -- over in the globe, it will lend itself, but even within a territory...

Excuse me, sorry to interrupt you just to ask this, the biggest market, I presume is the U.S. Is it not?

It is, yes.

So do you have a bigger competitor in the U.S.?

No.

I'm sorry, did you say yes?

I said no. We you don't have -- there are several competitors in the U.S., but they tend to be contextual. So it's usually genre-based, the competition.

I see. So in some genres, you have larger competitors?

Sure, yes. Like, we're starting to grow in the U.S. We're starting to grow more in pop and dance. That kind of music. That tends to be serviced by another competitor. We're growing our usage, but we think we can grow a lot more in the U.S. in that genre, for example.

What's the biggest genre, something like Western Music?

Okay. Country music is a huge, huge genre, and that's where we're the dominant player. That's -- if you don't use us in-country in the U.S., you're probably not going to be successful. I'm not reticent, going back to your comment about saying that we're going to grow revenue, it's just a matter of when. And changing -- for example, going back to Canada, changing that market is going to be over a short period of time. It's not -- you don't acquire 10% of the market, you acquire the market over a very short period of time. And I think that we'll do that. It's just a matter of when. I am a little bit reticent to tell you that because then you build up these expectations and people think of it as being catastrophic if you don't meet them when there's...

Well, I just got the impression that you're saying you have a better mousetrap than anybody, and yet you don't sound as optimistic as I would if I had a better mousetrap.

Well, that goes back to the network of use. So in the same way that our downside risk is low because we have a network of use in territories, even if a competitor is inferior, they have a network of use. So recipients know where to go and senders know where to send. Now that was true when we displaced CDs as a delivery tool. The promoters, the customers that are -- their promotion roles are hinged -- they hinge on getting that song on the radio, for example, or getting promotions in that song. Now the last thing they want to do is risk leaving a channel that could break that song. So it takes momentum. It takes building up that faith that they're going to be successful in spite of using an inferior system.

What do you worry about the most? Do you have half a dozen worries, concerns?

Staff retention is probably one. I don't have any reason to worry about that, but it's -- I think we've built up a great team, and I would like to keep them. There's -- making sure that we can obtain major label use in different territories is something that I'm concerned about, I want to keep that strategic use growing. Those are my -- that's it.

Well, that's good if you only have 2 worries.

Well, yes, that's all I can think of.

Okay. Good for you. What will change for the better or the worse when COVID ends, if and when it ever does?

Well, it's -- one of the things that we say we have a better mousetrap, I think sometimes, it really helps to build relationships. So we're still building a sale, especially when it comes to the strategic sale. A strategic sale is building up relationships. And that's easier to do not on a Zoom call, in person, so that's really what it will change.

Very good. Good luck and all.

Okay, thanks.

And at this time, Mr. Vandenberg, we have no other questions. Please proceed, sir.

All right, okay. Well, I hope that was informative. Thanks, everyone, for joining the call. Look forward to next quarter. Thanks.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.