FINAL TRANSCRIPT
Destiny Media Technologies Inc.
Second Quarter Results Conference Call
Event Date/Time: April 14, 2016 — 4:30 p.m. E.T.
Length: 56 minutes
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
CORPORATE PARTICIPANTS
Fred Vandenberg
Destiny Media Technologies Inc. — Chief Financial Officer
Steve Vestergaard
Destiny Media Technologies Inc. — Chief Executive Officer
CONFERENCE CALL PARTICIPANTS
Walter Schenker
MAZ Partners — Analyst
Hubert Mak
Cormark Securities — Analyst
Philip Mitchell
Contra Mundum — Analyst
Bill Hudson
Private Investor
Dave Shannon
Private Investor
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
2
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
PRESENTATION
Operator
Good afternoon, ladies and gentlemen, and welcome to Destiny Media Technologies’
second quarter results conference call. At this time, all lines are in a listen-only mode.
Following the presentation, we will conduct a question-and-answer session. If at any time
during this call you require immediate assistance, please press *, 0 for an Operator.
The call is being recorded on Thursday, April 14, 2016.
I’d like to announce that the company will be referring to today’s earnings release, which
was sent to the newswires earlier this afternoon.
I’d also like to remind everyone that this conference call could contain forward-looking
statements about Destiny Media Technologies within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based upon current beliefs and expectation
of management and are subject to risks and uncertainties which could cause actual results to differ
materially from those forward-looking statements.
Such risks are more fully discussed in the company’s filings with the Security Exchange
Commission and SEDAR, and the company does not assume any obligation to update information
contained in this call.
During the call we will discuss certain non-GAAP financial measures. These non-GAAP
financial measures are presented in the supplemental disclosures, and should not be considered in
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
isolation of, or as a substitute for 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 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 non-GAAP financial
measures to the most comparable GAAP financial measures can be found in the earnings press
release.
On today’s call we have Steve Vestergaard, Chief Executive Officer of Destiny, and Fred
Vandenberg, Chief Financial Officer.
With that, I would like to turn the call over to Fred. Please go ahead.
Fred Vandenberg — Chief Financial Officer, Destiny Media Technologies Inc.
Thank you. I will very briefly highlight our financial results for the quarter before Steve will
talk more about what we do and our progress during the quarter.
Total revenue grew by 3 percent during the quarter year over year in spite of weakness in
the euro and Australian dollars relative to the US dollar. We saw Play MPE revenue grow in all
geographic territories in which we operate.
As well while revenue is very small at this stage, Clipstream revenue has seen progress in
our enterprise and hosted solution, as well as our market research clients.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Over the last year we have reorganized roles and responsibilities within the company, and
have a more methodical approach to product developments, along with a well-defined product
roadmap. Our staff are becoming more experienced in their roles, and we have been making progress
in operational efficiencies and business development activities.
We are seeing the beginnings of that reflected in MPE revenue during the quarter and
subsequent to the quarter.
Quarter-over-quarter, expenditures dropped by 25 percent as a result of a reduction in
compensation and public company costs. Offsetting these drops were slight increases in marketing
and technology costs.
The majority of our cash reserves are kept in Canadian dollars for use in Canadian operations
and during the quarter that balance increased to $673,000.
With that, I’ll turn it over to Steve.
Steve Vestergaard — Chief Executive Officer, Destiny Media Technologies Inc.
Thanks, Fred, and thanks to all of you for joining the call today. It’s been a busy three
months, and I’m happy to be bringing everybody up to date on what we’ve been up to here.
So for new investors—same thing I do every quarter—I’d like to remind everyone exactly
what our company does. So we have two business lines: Play MPE and Clipstream. And Play MPE, as
most of you know, is a secure automated system the record companies use to move broadcast-quality
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
new music releases securely to trusted recipients, such as radio; Internet radio; bloggers; DJs; media;
and VIPs.
So all the major record labels are active customers, as are a large number of our
independents. There’s a large fixed cost providing the service, but once that fixed cost is covered
incremental costs are extremely low. So we grow it—as we grow in the new markets, the revenue is
really high margin.
Our second business, Clipstream, is a new video hosting and playback solution the delivers
high-quality streaming media directly to the browser without payer plugins. Rather than use the more
traditional approach of proprietary streaming servers and playback with the HTML5 video tag, hence
transcoding it to a large number of formats, we use an alternate approach to the group.
We use our own proprietary JavaScript player and standards-based cloud web hosting
solutions to deliver our content.
So this software-only approach is extremely flexible and is allowing us to offer advantages,
such as better security and a more consistent user interface. Users can drag and drop their content
from any device in almost any original format through their web browsers. Our servers convert and
host, providing a convenient embed code so customers can place the video into their own website.
So from an investment approach, both businesses have recurring revenues, and both will be
really steady and predictable over time and customers tend to be really sticky. And that’s why year
over year our financials are pretty predictable.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
And I used the word sticky, but it’s true. Once you’re a customer you rarely lose the
customer.
Also because the businesses require limited capital, margins and returns should be really
attractive over time.
So now for the current Q2 quarter. So I’ll review each business starting with Play MPE. Our
slowest time of the year is the Christmas holidays when little new music comes out. We took
advantage of that last quarter to move our backend from our five-server facilities around the world
to a cloud-hosting system powered by Amazon’s AWS service.
This was a really big move, with just the transfer of the 2.7 million encrypted tracks taking
nearly a week over one of the largest gigabit Internet backbones pipes.
The motivation for such a big move was to provide a much more scalable system where we
could more closely match our cost minute to minute to usage with a nearly unlimited ability to scale
when bursts of transactions and revenue justified it.
With the old way we were physically limited in terms of electricity; real estate; Internet
capacity; routers; and how quickly we could scale. Now basically Internet is completely unlimited.
We’re able to host content in locations all over the world, so music and videos are always close to the
end user.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
So this was a good quarter—we could do better—but we showed growth in all markets as
expressed in local currencies. After the currency fluctuation, the US increased 6 percent, Europe 3
percent; Australia 11.
We spent the current quarter working with majors to help them with expansion plans,
expanding our marketing independence, and polishing this move to the cloud so we can continue to
roll out new products and features next quarter.
So why? This is a question I get from staff too, but the move to the cloud was motivated by
a desire to reduce the chances of catastrophic failures and risks with core functionality not being
better distributed geographically, improved scalability and performance, and a segregation of
development into a separate platform from the live operating system so new features could be better
tested without impacting anything that we’re doing live and in production.
So we’re expecting and we expected to save money over time on hardware, staff, and
transactional costs, and that was one of the motivations, but that hasn’t happened yet. Those cost
savings have not been realized yet, and are actually—to tell you the truth—the AWS system is actually
costing us quite a bit more than we spent in previous years, but it’s with a big benefit in terms of value
to our customers.
So so far we’ve only eliminated two of the five internal server locations. We expect to
eliminate two more over the next two quarters, so over time we’re going to be saving some money.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
There have been some onetime costs with the move, and ongoing costs have been higher
than in the past, but we’re investigating ways to reduce the AWS cost in the coming quarter. And we
actually expect to reduce the cloud costs quite significantly over the next three quarters.
So if you take the current quarter as a starting position, we’re expecting expenses to decline
quite a bit over the next nine months.
But anyway, costs aside, the feedback from labels has been extremely positive as the new
system is much more responsible, much more reliable, and it’s in a state where it’s never going to go
down.
So for development we set up a full-time development testing system for both products;
moved all of our intellectual property into a new source code control system. We introduced
automated bills and centralized configuration management. The development environment we have
now also allows developers to write and verify features without impacting production services.
It allows testing to verify independent of development, and it allows our DevOps team to
deploy to production with confidence to four initial AWS locations around the world. From those
locations we can scale up with mini servers as demand requires it.
So for production we now have a new built-in failover system, improved monitoring, and
the ability to push updates really quickly. The previous deployment model was a single active passive
setup, which isn’t as reliable as a micro-active active model, where there are many small servers
dedicated to performing one service each.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
We have a minimum of two of the same type of server running in each of four different
availabilities zones. So basically that means if hardware fails in an availability zone the other server
takes over, but if both fail—like if there’s an earthquake or something—then it pushes over to the
other three availability zones. So it’s a highly efficient redundant system.
In the event of a major outage in one availability zone the other would continue to operate,
and the same occurs for other potential hardware failures.
Our database previously had been synchronized between two geographic locations with a
delay of at least five seconds. Today our database is stored in six different places spread across three
availability zones, and the maximum delay is six milliseconds. Patches to the database server occur
automatically using the built-in failover that occurs in one to four seconds. We’ve added two-phase
authentication using digital certificates, and that’s all centrally logged.
All this brand-new security is in addition to existing security protocols, making us by far
and—far and wide we’re the most secure system that’s available for the media industry kind of
worldwide here.
So the cloud system works quite differently than the old system. The number of servers
wasn’t effectively unlimited. We spent this quarter rewriting core server code to take better
advantage of the cloud. That allowed us to improve performance without sacrificing the security of
the system.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
This was a really big move, and now that it’s over we’ll be launching products that have been
near completion and on hold since last year. These include new offerings the labels have been
demanding, such as the web-based encoding system and streams in e-mail and streams on the daily
site. We expect these features and others to directly impact revenue positively in coming quarters.
So now I’ll review Clipstream. So with Clipstream we developed a platform to overcome the
limitations built into the browser in the traditional way of delivering video.
We’ve pursued seven US patents and a couple dozen globally. And the status of the patent
portfolio is available under Intellectual Property if you go to our dsny.com site. We’ve been making
really good progress on grants.
So we have three US patents that have been directly granted related to Clipstream. Patent
four was granted, five was allowed, and six is about to be allowed, but as our international patents
are granted international examiners are finding prior art that we were disclosing in the US. So it’s kind
of one step forward, two steps back.
We asked the patent office to pull back one of the four so we could make up our disclosure.
This is slowing the process by a few months, but we want to make sure our patents are rock solid
before pursuing copycats we believe are infringing on our IP rights. We’re crossing every T and dotting
every I because we expect to win as we go after some of the infringers.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
So I won’t spend a tonne of time dwelling on the advantages of Clipstream; you guys have
heard it before in previous quarters. But the headline version is that since we are a software solution
we aren’t locked into waiting for browser updates, so we’re not waiting for new chips.
If we want to put a new feature in we put the feature in; then we launch it right away, and
launch it right away and reach everybody. So we can offer new feature and instantly reach basically
100 percent of modern browsers with our JavaScript software that’s natively supported by any
browser that claims to be HTML5 compliant.
That’s what the seven patents are all about, and it’s a really big deal. It’s all about giving
control back to the owners of the content so they can securely and simply provide the exact customer
experience they want consistently to every device, every operating system, and every browser
version.
So it’s been slow to market. In my mind the Clipstream service has been minimally
commercially ready since about October. Revenues are up over 4 times; the amount is admittedly
token, but it’s mostly recurring revenue, and it’s establishing the commercial opportunity for the
system.
For every $29 customer that recurs over and over again for 12 months in a row, it tells us
that we have a business opportunity.
So based on customer feedback, we’ve been rolling out new functionality and features every
two weeks, and have had seven full solid updates since our last conference call. A more telling statistic
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
is we’ve streamed 141,000 minutes in February, and the backend’s held up well. And in the backend
we just light up servers to match demand to cost, and that’s all worked extremely effectively.
So that’s kind of the good news, but I also want to share the warts with the roses. And
although on some ISPs our video is extremely high quality, we’ve struggled with some other ISPs
where content isn’t recognized as video.
So ISPs have the concept of quality of service where they provide super-high quality of
service if they recognize HTML5 video or they recognize Flash. They’re just seeing us as a data stream,
and we’re not benefitting from that quality of service. And when we’re not recognized our data can
be throttled or bandwidth can be extremely volatile, and that’s caused us a lot of problems. And it’s
taken us a couple years to figure out solutions.
So we took our own proprietary video codec—so codec is co is compression; dec is
decompression—so it’s basically a way to squish video down and then blow it back up again. We took
that as far as we could with our October release, but mid last year we started a skunkworks project
in parallel to our own format. This is the secret project I mentioned in the transcript of our last call.
So the secret project is a brand-new format, HEVC, which is much higher quality than what’s
currently available in widespread use. And I’m so impressed with the team because mathematically
HEVC is really processor-intensive, but using game-type techniques we’ve been able to implement it
in JavaScript and instantly get HEVC everywhere.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
We don’t have to wait for new browsers to support it, or for new phones to embed the chips
into the phone. We can play this format cross-platform immediately and now.
So according to the BBC in the UK, the format uses half the bit rate as H.264. So H.264 is the
one commonly used by sites like YouTube. If you want to check it out yourself, the BBC study is at
tinyurl.com/hevc/bbc
(sic)
(tinyurl.com/hevc-bbc).
Again,
tinyurl.com/hevc/bbc
(sic)
(tinyurl.com/hevc-bbc).
So I don’t have access to solid stats for Clipstream yet; we’re still pretty early here, but it
looked absolutely great on our 4K big-screen TV at the Annual General Meeting. We still have CPU
limitations on some devices because JavaScript is really, really slow, but this is a nice breakthrough
for us.
So the AGM demo was only a prototype, but since then we’re now in the final process of
doing a mobile version and integrating it into our production system. We plan to market it widely
when it comes out when you get press and industry publications. So the shouting from rooftops that
everybody’s been waiting for is going to happen subsequent to this HEVC release.
We’re continuing to add features every two weeks, and I’d invite shareholders to try our
free 30-day trial. We’re signing up monthly customers and building a recurring revenue. But HEVC is
a game-changer in that it takes away one of the very last objections we get from bigger customers.
Publishers that like HEVC can roll it out instantly with us rather than waiting for years and
years for most browsers to support it. Again, it’s a really big deal.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
14
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
So I’m sure this is probably stimulating a whole tonne of questions so, Operator, please open
up the line, and we’ll go to it.
Thank you.
Q&A
Operator
Thank you, sir. Ladies and gentlemen, if you do have any questions, please press *, followed
by 1 on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Note
that questions will be taken in the order received.
Should you wish to withdraw your request, please press *, followed by 2. And note that if
you are using a speakerphone, you will need to lift the handset before pressing any keys.
And your first question will be from Walter Schenker at MAZ Partners. Please go ahead.
Walter Schenker — MAZ Partners
Thanks. Hi, Steve. It’s all going over my head, but sort of followed all the technology, and it
sounds like you’ve made some really significant progress on that front. However—and are making
some progress on the cost front. The real key is making progress on the revenue front because that’s
where the leverage comes in. Given where you are on the music side, when might we expect—I’m
not asking for a quarter-by-quarter forecast or anything—when might we expect an acceleration of
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
the mid-single-digit local currency growth that you’ve experienced this quarter? I suspect on
Clipstream the real growth still awaits the new development with the new technology.
Steve Vestergaard
Yeah. So good questions. So I know I’m kind of repetitive because I say this every quarter,
but it’s difficult for us to go after independents in new markets until we have the majors in those
markets. And so this quarter we’ve done the single-digit growth, which is important and something
that makes us all money here, going after solid markets. So we’re putting a lot of energy into like
Northern Europe and the US, and going into Australia/New Zealand we did really well—I think we did
over 11 percent this quarter—but going after growth in markets where we already have a lot of
penetration from majors.
The difficulty is in brand-new geographies it’s hard for us to get independents until we have
the majors. It’s hard to have the majors until we have Universal. Universal is like 45 percent of the
market.
So one of the exciting things that happened last quarter—actually subsequent to last
quarter—is in December, which was the first month of the current quarter, we closed the deal with
Universal. Since then we’ve been working with them. We sent staff to Europe to go into new—to
explore with new markets and everything. And we’re working with them to kind of roll out.
Again, the same complaint I have every quarter, we have to work according to their business
plan, kind of not ours. So what I’m expecting with MPE is steady consistent growth quarter to quarter
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
to quarter to quarter as we’re able to roll out with the majors, which allows us to roll out with the
independents.
That kind of stagnated for a bit because we went a whole year—all of last year—without
being under proper contract. That problem’s behind us.
A secondary problem was that we are in the process of migrating to this new system.
Everything is cloud-based now, whereas it used be tied to our five-server facility. Fixing those two
problems doesn’t automatically get us revenue, but not fixing those two problems holds us back.
So the issues in 2015 that slowed us from growing revenue are kind of addressed. So I don’t
know if I can promise you double digits quarter to quarter, but single digits actually start to add up if
you keep doing that on a consistent basis.
With Clipstream, we can get staircase growth because it’s a little bit binary. You either get
the business or you don’t. And when you go fishing you see the big, big fish there, but it doesn’t count
until you get him on the scale. And we’ve got a lot of big fish circling, and we’ve got a lot of big
opportunities, but the complaints that they’ve come back with have been show-stoppers.
And one of the complaints has been that on unpredictable ISPs, and ISPs that don’t
recognize us as video and where the bandwidth can be really super volatile and they can go down to
super low-bit rates, we haven’t historically been providing the best performance for everybody.
Providing the best performance for 80, 85 percent of the people is not good enough; you need to
provide it for everybody.
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is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
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Destiny Media Technologies Inc. Second Quarter Results Conference
Call
We’ve slowly and surely been going through the objections, and like I said, every two
weeks—so seven times in the last quarter—we’ve rolled out major, major revisions. I really encourage
investors to go—the trial’s absolutely free—I encourage you to go to clipstream.com and try it to just
see how far we’ve come in the last three months.
But one of the very last objections that’s still outstanding is the quality. And like I said, we
took the quality as far as we could in October. We haven’t completely abandoned our own codec;
we’re going to use it as a fallback, but this new codec—this HEVC that we’re using—it’s a leap.
So not only is it as good as what everybody else is using, it’s much better. And so I gave you
guys the link to the BBC study, but I encourage you to go take a look at it. You can just see statistically
how much better this new codec is than everything else.
And so we’re just basically jumping the whole industry. And for them to catch up and to
offer this HEVC they have to roll out new chips; they have to roll out new browsers. That takes time.
In the meantime, we’re out there instantly with JavaScript.
Walter Schenker
Okay. And then just one other unrelated question. As you look at your balance sheet, you
are comfortable? Given your outlook for the year of steady growth with your capital situation?
Steve Vestergaard
Yeah. If you take a look at it, our cash in the bank is way better this quarter than it was a
year ago. We did do a small financing, but more importantly we’ve been massively reducing our cash
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Destiny Media Technologies Inc. Second Quarter Results Conference
Call
expenditures. On a cash basis we’re well on our way to the black. I’m not going to publicly say when
I think we’re going to go profitable again, but that’s the goal.
I can better address this one quarter to the next. I’ve been advised not to give cash
projections going forward more than a quarter, but no, we’re not looking to raise money at this point.
Walter Schenker
Okay. Thanks a lot.
Steve Vestergaard
Thank you.
Operator
Thank you. Next question will be from Hubert Mak at Cormark Securities. Please go ahead.
Hubert Mak — Cormark Securities
Hey, guys. Just your commentary regarding how you saw growth in your MPE across all
different regions, like can you just give me an idea where that growth has come from? Like what’s
causing—is it independent labels that’s driving it since it sounds like UMG is still not—like slowly
pushing it out?
Steve Vestergaard
So we have—I’m going to turn this over—giving Fred a head’s up here; I’m going to turn it
over to him, but we did sign up a reseller in Australia/New Zealand. We did press release that. We
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
signed one up in Northern Europe I don’t think we bothered press releasing. But we’re putting a little
bit of effort into it.
So we’re putting effort into advertising and marketing reaching out to the independents in
the markets where we’re already solid. So it’s been really easy for us to coast in the past, but we’re
actually putting some effort into expanding usage.
But in terms of where the big wins are, I’m going to turn that over to Fred.
Fred Vandenberg
Hi, Hubert. The increase in Play MPE has really been throughout our territories. And I think
probably the biggest positive impact is the US independent label revenue. Generally what we do is
we split our revenue into geographic territories, and then split that between major labels and
independents. In the United States our independent label revenue grew by 30 percent over the
previous year, and I think that’s probably the largest single impact.
That’s an area where we just continue to grow, and I can’t state right off the top of my head
how many quarters it is, but I think it’s something like 26 of the last 28 quarters it continues to grow.
And the last—this period has been a 30 percent increase. So that’s a pretty good indication of how
sticky our revenue is.
Also during the quarter and over the last few months we’ve begun more of an account
management relationship with our major labels in the United States, and I think that’s showing some
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is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
progress in terms of identifying potential issues that we have with them, and we can address them
operationally and from a business development standpoint.
You do see some—like some of the growth is hidden by the fact that the Australian dollar
isn’t doing well relative to the US dollar and similarly with the euro.
Hubert Mak
Okay. And then just on the Clipstream then, can you just sort of summarize it again maybe
just the key things that you need to—how do I say—where from the technology side just to round out
the technology since you’ve kind of highlighted that 80 percent it works, but then you’ve got sort of
the 20 percent. So—well, can you just kind of just hone in exactly the key things? Is it just I mean the
quality and when you expect it’ll be done?
Steve Vestergaard
Yeah. So I can kind of address some of that. So there’s two completely different ways of
looking at it because we’ve got our raw Clipstream engine, which is just JavaScript; big, huge
advantages to being JavaScript-based. But there’s a commodity offering, and that’s the hosting
system.
And so on the hosting side we’re competing with a whole bunch of commodity providers.
Even our own supplier, Amazon, in a way is a competitor when it comes to commodity hosting. And
there’s probably about 100 companies that have a big role in commodity hosting of video.
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Destiny Media Technologies Inc. Second Quarter Results Conference
Call
And so when we look at it, we look at every single competitor and we say here’s a feature
they have that we don’t have; here’s a feature another one has that we don’t have. And we made a
big list and we’ve been chipping away at it.
And like I said, there’s been seven updates in the last quarter; there were seven updates the
quarter before. And we’re starting to run out of features that we need to match. Now we haven’t run
out yet, but we’re becoming more and more competitive when it comes to commodity hosting. The
problem is the commodity hosting customer is maybe $30 a month, maximum call it $400 a month;
$400 a month is $1,200 a quarter. We’re not going to get rich off that. That’s not what’s going to drive
the business.
On the other side, on the big side, we’re dealing with the ad customers. We’re working with
one big one. We’re not allowed to say their name, but they’ve been doing some real big stuff. I kind
of implied that when I mentioned some of the impression numbers in terms of minutes that we
streamed in February.
But we’ve chosen not to chase a whole pile of them because they’re coming back to us, and
they’re saying in the ad space here’s some features that we need that you guys aren’t offering yet. So
we’re building that out.
In my little transcript I’d spent a lot of time talking about development. And the reason is
the fish in the pond are telling us that for us to bite here’s some of the features that you’re missing.
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
But the real big one is the API customer. The API customer could be a corporate customer
that wants to offer it to their own users, or ISP or I mean I can list dozens of different types of API
customer. They’ve come back to us, and they’ve had some big complaints.
But the biggest one is the quality. And so really, again, I kind of mentioned that with MPE is
solving the problem with the Universal contract and solving the problem with moving to the cloud is
necessary, but it doesn’t automatically get revenue. Kind of the same thing here is until we solve the
quality it’s hard for us to grow revenue. It’s not overnight that you get revenue just because you
solved it, but it’s one of those things that’s necessary. It’s one of those things that you’ve got to do
first.
We demonstrated that at the AGM. The feedback that we’ve got from investors that viewed
it on our big-screen TV at the AGM is like this is the best of the best; no complaints. But until we roll
it out it’s tough for us to get those big customers.
In terms of timing I’m not going to give a date, but we expect it to happen in the current
quarter.
Hubert Mak
Okay. I just want to be clear here. So quality-wise from—I know you haven’t really rolled out
to the customers—but from a quality standpoint you’re satisfied that it meets the level that
customers want? And what you’re working on right now is the sort of...
Steve Vestergaard
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liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
So, Hubert, what I’m trying to do is be very scientific about it. So with our own stuff it was
hard to be scientific. And so quarter to quarter we improved, improved, improved. The version we
came out with in October for, call it, 85 percent of customers is absolutely awesome. They all get a
good experience, but it’s because they have Internet connections that are not volatile, that aren’t
throttling or anything like that, and they get like really good performance.
But with our old system there’s a certain percentage that didn’t. So what we’ve done is—
forget any claims that we make—we went out to the industry and we’ve licensed one of the—well,
basically the current state-of-the-art. So the old state-of-the-art is something called H.264. That’s
what YouTube uses; that’s what almost everybody uses. And we’ve skipped that, and we’ve gone to
HEVC.
So that’s high efficiency video codec. I gave you the link to the BBC—I don’t have it handy
here—but if you go back; you click on that link; they’ve done a scientific study; and they can
mathematically talk about how much better it is: how much you save on bit rate, how much better
the quality is. Not only have we been able to adopt that, we’ve been able to get that to work in
JavaScript, which means we instantly work everywhere.
I don’t have to make a claim because the BBC’s made the claim for me. It’s significantly
better than what everybody else is using.
So everybody else is planning on rolling out to that at some point, but for them to roll out
they need to get the phones to put in the HEVC chips. They need the browsers to support the HEVC
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
codec. That hasn’t happened yet, so we can get a bit of a first-mover advantage where we could take
this much—where we could skip from being a little bit behind the curve to being way ahead of the
curve, and we can do that almost instantly as we roll out the next version.
Hubert Mak
Okay. And then so basically what you’re saying is that the quality obviously stays on that
HEVC codec. So right now what you’re working on is rounding out the features that are being offered
by the competitors out there? Is that what you guys are working on to...
Steve Vestergaard
Yeah, yeah, yeah. Yes. So kind of both. So in terms of rounding out the features that the
competitors have, we made really good progress. We’re starting to run out of features. We expect by
the end of 2016 we’ll kind of be matching everybody. But we’ve made really good progress the last
two quarters, and again, I encourage people to log in and try it for free. You can set up your own free
trial and see all the features that we’ve built out into our cloud hosting system, which is the
commodity hosting system.
But in the meantime we’re implementing this brand-new video codec. We had a desktop
version that was extremely solid, which we showed at the AGM. Since then we’ve had to get that
desktop version to play everywhere and implement it into our production system. What we’re
currently working on is expanding that new HEVC system to work with mobile. And mobile’s a little
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liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
bit more challenging because a lot of the phones have very limited processing; have very limited
memory.
And like I said, I’m not going to give a date as to when that’s going to be ready, but I’m
expecting it to be ready sometime in the current quarter.
Hubert Mak
Okay. So the new codec you’re still working on it to have it work on the mobile side then?
Steve Vestergaard
That’s right.
Hubert Mak
Okay...
Steve Vestergaard
So it’s already working on a lot of mobile. Like if you call iPad mobile, or the latest iPhones
it works great. We’re working more on trying to get it to work on some of the legacy devices, which
are a little more limited in their processing.
Hubert Mak
Okay. Great. Thanks.
Operator
Thank you. Your next question will be from Philip Mitchell at Contra Mundum. Please go
ahead.
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Philip Mitchell — Contra Mundum
Yeah. Hi, Steve.
Steve Vestergaard
How’s it going?
Philip Mitchell
Well. Yeah. I have a couple questions. One, you said that there were some like big fish sort
of circling around Clipstream, and they’ve come back with certain issues that need to be addressed
that are show-stoppers. And it sounds like you’ve addressed one of them at least, which is the video
quality with this HEVC incorporation into JavaScript. Are there other significant show-stopping issues
that need to be addressed as well?
Steve Vestergaard
Yeah. So I would say the biggest ones are features in our—so we provide an API, which is
basically like a gateway. So we have our backend, we have our technology, and it’s like a gateway that
lets them plug—almost like Lego—it lets them plug it into their system.
Philip Mitchell
Yeah.
Steve Vestergaard
They have a lot of feature requests: wishing we had better reporting or wishing we had this
or wishing we had that. None of them are show-stoppers. They could do a deal with us without them
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
being fixed. But on an ongoing basis we’re always going to be working and building and addressing
their requests.
But in terms of show-stoppers, I would say the real last one is just—I say quality and I don’t
want to say it because it makes it sound like we had something bad before. For call it 85 percent of
the market we were great, but it’s just unfortunately some ISPs throttle, some ISPs have real limited
bandwidth, and some ISPs are not recognizing us as video. And they’re just treating us like ordinary
data. And when that happens, yeah, the video’s got to drop, so that had to be addressed.
And so with that being addressed, yeah, we’re ready to go. And so I said the PR that we’ve
been promising for three years we’re ready to kind of reach out and start getting magazine articles
and start making noise. But it didn’t make sense to do that until we had all of the problems addressed.
Philip Mitchell
Okay. Thanks. Yeah. That makes sense. And my second—or last question deals with the
intellectual property. And you mentioned on one or two calls that there were some people that you’ve
observed are probably violating at least one or more of your patents. And you said this time that you
want to make sure the patents are really clean before you go after them. Are they—are these people
violating them in their own video streaming solution? Or how are they—what kind of products do
they have that they’re violating your IP?
Steve Vestergaard
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April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Yeah. Really good question. So in terms of anybody that’s offering what we’re offering,
there’s not really anybody out there yet. And it’s because what we’ve done is a little bit difficult;
embarrassing how long it’s taken. We’ve been working on this for six years, and in six years we’re still
running up against some challenges. And the reason is JavaScript is not intended to be a programming
language, so it’s been difficult for us to get this to work.
But that said—and I don’t want to name anybody—but there’s some extremely well-funded
start-ups that are trying to copy what we’re doing. And so that’s kind of the one side of it. They’ve
not been successful, but they’re chasing the Holy Grail. And as they chase it they’re definitely
infringing on things that we patented way back in 2011. We had a tremendous first-mover advantage.
But where people are actually making money today is in the ad space. So as an example—
I’m not going to give you all the examples—but as one example, when you look at a web page on your
iPhone, there’s little tiny videos on the page. You don’t necessarily want that video to go full screen.
If the video’s just an ad you don’t mind the little IBM ad playing in the corner, but you don’t want it
to take over your phone. And unfortunately, using the standards—well, fortunately for us, I guess—
but the iPhone when you watch a video the video will take over the entire phone, and advertisers
can’t do that.
And so JavaScript is basically the only solution for they call it in-screen ads, and it’s a really
big…
Philip Mitchell
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
29
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Right.
Steve Vestergaard
Deal. We have a whole bunch of companies that are out there making money that they’re
basically taking out of our wallets doing in-screen ads using JavaScript. So they’re not really doing
anything difficult because the ad is small, and they’re just playing back like a tiny little ad. They don’t
have to do all the difficult things that Clipstream’s had to do, but they’re infringing on our patents.
And I could give you a whole bunch of examples like that. My lawyer would probably get
mad at me if I went into too much detail.
Philip Mitchell
That’s helpful.
Steve Vestergaard
But we’ve identified about two dozen groups that are infringing. Now I’ve had investors
come to me and say, you’re not going to be one of these patent trolls that’s suing everybody? Well,
not necessarily. You can enforce your patents and make money without infringing, so we’d be open
to licensing, royalties, partnering, and only suing when somebody’s egregiously hurting us.
But the bottom line is we invented this technology, and our investors deserve to basically
get the value out of it.
Philip Mitchell
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
30
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Okay. Yeah. Great. Just last comment or question was, yeah, I mean if you could—once your
IP is claimed and you’ve got a mature product then if you could go to these guys and say, we noticed
that you’re using our intellectual property; no one wants a war; why don’t you look at our solution,
which is better than yours, and we’ll let you use it for a certain amount of money/licences. Is that
what you’d ideally like to do?
Steve Vestergaard
Well, ideally. There’s companies out there that have raised $50 million to try and do
JavaScript video. Instead of fighting them tooth and nail, maybe they could use their $50 million to
become one of the best Clipstream resellers...
Philip Mitchell
Okay.
Steve Vestergaard
That said, if they don’t want to do that we aren’t afraid to litigate...
Philip Mitchell
Sure.
Steve Vestergaard
I’ve already dealt with three different firms that’ll do it on contingency…
Philip Mitchell
Right.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
31
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Steve Vestergaard
So it doesn’t have to cost our shareholders anything, but enforcing patents isn’t necessarily
just about lawsuits.
Philip Mitchell
Okay.
Steve Vestergaard
Basically...
Philip Mitchell
Okay. Thank you. I’ll hang up and listen. Thanks, Steve.
Steve Vestergaard
Okay. Fair enough.
Operator
Thank you. Next question is from Bill Hudson, private investor. Please go ahead.
Bill Hudson — Private Investor
Hey, Steve. Thanks for taking my call. You actually answered my question. That last question
was the same question I had about the infringement on the patents and how big that market was.
You addressed that. And also…
Steve Vestergaard
Well…
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
32
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Bill Hudson
Get started on…
Steve Vestergaard
Well, the thing is I think that market’s going to get bigger and bigger. And the reason is when
we started this six years ago computers were a lot wimpier back then, and JavaScript was a lot weaker.
We would have never thought of doing something like—well, even H.264, which is the previous
technology—we could have never got that working in JavaScript. But things have come a long way.
Browsers have gotten better, computers have gotten better, and the possibilities have
increased a lot. Our patent claims aren’t limited to video. Our patent claims expand to a lot of things
that are done in JavaScript, especially when you talk about decompression. When we look at new
things that are coming down the pipe, like for example some of the virtual reality stuff not natively
supported by the browser, but if we were to implement it in JavaScript we’re protected by patents,
and we could immediately be cross-platform. We had the advantage of kind of seeing the vision
before the technology was there, ready to take advantage of it.
So like I said, there’s a couple dozen infringers right now, but the expectation is there’ll be
a lot more over time. The market is so big it doesn’t make sense for us to be obstructionists. It makes
more sense for us to use other companies, other start-ups; they’re raising money; they’re trying to
do something big. In most cases it’s probably better for us to work with them and take a royalty, and
kind of let everything succeed.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
33
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
But the more we work with that ecosystem of other companies that see the JavaScript vision
the more that ecosystem gets locked down. And we’re kind of on the back side, and our investors
are—or they’re able to take a little bit of a royalty off the back of a lot of transactions.
Bill Hudson
Sounds good. Thanks, Steve.
Steve Vestergaard
Thank you.
Operator
Thank you. Next will be Dave Shannon, private investor. Please go ahead.
Dave Shannon — Private Investor
Yes. I have a couple of questions. One was back a few years ago there was some big company
that was looking to buy out Clipstream, I believe. And at that time you said that you couldn’t mention
who it was. Is that possible now?
Steve Vestergaard
I’m giving Fred like about three seconds to object, but I think it’s okay. It was Sun
Microsystems.
Dave Shannon
Oh, okay.
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
34
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
And in particular it was their Netscape group. And the reason was…
Dave Shannon
Okay.
Steve Vestergaard
They owned Java...
Dave Shannon
Yeah.
Steve Vestergaard
And I know Java and JavaScript sounds similar. They’re actually completely separate
technologies. The only thing similar about them is that the programmers drank coffee from java, but
they ended up selling out to Oracle.
Dave Shannon
Okay. Yes. I do remember that. And the other question is I’ve noticed there hasn’t been any
Board or officers that have bought any new shares since January of 2015. I just wanted to throw that
out there. Are you guys satisfied with the amount of shares you have? Or just things—and I would say
if one or two didn’t, but all of them at the same time it just made me sort of curious about it.
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
35
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
I can’t speak for everybody else, but I’m starting to run out of money. But if you look back, I
think there’s only been a couple of years that any officers or directors have ever sold shares, including
at the peak. Peak was $4. The recent peak was $3...
Dave Shannon
Mm-hmm.
Steve Vestergaard
You won’t see any insider trading. But almost every year insiders have bought, but yeah,
we’re a little frustrated with the stock pull back as well.
Dave Shannon
Right.
Steve Vestergaard
We’re a little more focused on the business, and the market’s kind of got a mind of its own.
Dave Shannon
Mm-hmm. Yeah. Yeah. I read an article, oh gosh, when it was hitting that almost $3 level,
Alpha Omega or something like that had a guy who published an article, and I just watched it at the
point. He just bad mouthed it after they had just promoted the stock a whole bunch, a few quarters
in a row, and then all of a sudden it’s like, boom, all the way down to where it is now. But the guy
actually said something that the price should only be around, I think, it was 0.11 or $0.12 a share.
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
36
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Well, I mean if you look at market cap, just take our revenue...
Dave Shannon
Right.
Steve Vestergaard
That doesn’t make any sense, but...
Dave Shannon
No. No, it didn’t to me either.
Steve Vestergaard
The bottom line is the stock price is just what our audience thinks we’re worth...
Dave Shannon
Right.
Steve Vestergaard
Which is complete—it’s not completely out of our control. We probably have some
influence in what we put out in press releases and everything. But what we have the most influence
in, pure profit. And so MPE is a very profitable business. We’ve chosen to put that profit back for the
last six years into Clipstream...
Dave Shannon
Mm-hmm.
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
37
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
We think investors are going to be well rewarded. We’ve built something that we think is
pretty special, and is protected by dozens of patents around the world. And the proof is in the
pudding. It’s easy for us to make a lot of promises. It’s better to be a little retroactive and kind of look
back at what we’ve succeeded on.
Dave Shannon
Mm-hmm.
Steve Vestergaard
But now it’s up to us to go out and get the business, and that’s what everybody’s waiting
for...
Dave Shannon
Right. Mm-hmm.
Steve Vestergaard
My expectation is the share price will look after itself as we’re able to perform, but the only
thing that’s in our control is to perform.
Dave Shannon
Okay. There’s another question, so...
Steve Vestergaard
Basically the answer to your question is that it’s very rare for a share price to accurately
value a company. Usually it’s either ahead of the curve or behind the curve.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
38
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Dave Shannon
Mm-hmm.
Steve Vestergaard
It’s pretty rare for it to be right on the money.
Dave Shannon
Right, right. Oh, so I missed the first part of this call, so I didn’t actually get to hear what was
the total increase of revenue from Clipstream in dollar amount this last quarter?
Steve Vestergaard
Well, we’re going to get audited on this, so I’ll be really honest: it’s a huge percentage. I
think it was like 400 percent or something, but to tell you the truth...
Dave Shannon
Right.
Steve Vestergaard
In dollars it was only $14,000.
Dave Shannon
Okay. Yeah. That’s what I was looking at. Yeah.
Steve Vestergaard
But $14,000, $29 bucks at a time, it basically speaks to a business that we can scale as we’re
able to make it work.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
39
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Dave Shannon
Mm-hmm. And then one more question. You invite us to go to your website to check out—
for investors to check out how the Clipstream is looking and everything. As far as—I haven’t done that
for that free 30-day trial because I have no desire to put any kind of video to it. So how do I—you’re
just saying there’s some examples there and it would just show it or what?
Steve Vestergaard
You could reach out to our salespeople. I’m not sure if it’s still there. I think we have a realtime chat. I haven’t looked myself for a while, but either way either the chat or by e-mail reach out to
our salespeople...
Dave Shannon
Okay.
Steve Vestergaard
Just say you’re an investor and can you show me some of the latest and greatest, and you’ll
probably get a chance to even take a look at the HEVC, even though it’s not ready yet...
Dave Shannon
Okay.
Steve Vestergaard
But in terms of the trial, you go to clipstream.com. I do have the link in front of me again. I’ll
read it one more time, the BBC...
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
40
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Dave Shannon
Oh, yeah.
Steve Vestergaard
But the BBC study is tinyurl.com/hevc-bbc.
Dave Shannon
HDBC did you say?
Steve Vestergaard
H-E-V—V as in Vancouver—C dash B-B-C.
Dave Shannon
Oh, okay. All right.
Steve Vestergaard
And so like I said, this isn’t our format. This is a format that we have to pay—we have to
actually pay patent fees on it. It’s a new format that the industry’s come up with, but we’re able to
support this format way ahead of everybody else because we don’t have to wait for...
Dave Shannon
Right.
Steve Vestergaard
Roll out.
Dave Shannon
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
41
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
So when is this new format supposed to be rolling out? Is it ready now? Or is it...
Steve Vestergaard
Don’t ask me where because I don’t know, but some browsers and some chips are probably
already starting to support it. But these kinds of things take time. It’s going to be a few years to roll
out.
Dave Shannon
Mm-hmm. Okay.
Steve Vestergaard
So the current format that’s—so the current formats that are common are VP8 and VP9,
which are Google formats. And more the industry format is H.264. The HEVC is branded as H.265, so
it’s intended to be the replacement for H.264.
Dave Shannon
Okay.
Steve Vestergaard
One of the reasons that it’s coming out is all the old H.264 patents are expiring and going
into the public domain, so for them to collect royalties they need to come up with something new.
Dave Shannon
I see. And this is supposed to be brighter and clearer and better and all that other stuff?
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
42
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
There’s a couple of formats that the industry is going to be adopting. There’s another one
that looks like it may have some opportunity, but yeah, this is kind of the big next one. But we’re in a
nice position because being software-based we can either do one of them or all of them, or
whatever’s the flavour of the month we can instantly support it, and we’re instantly cross-platform
everywhere.
Dave Shannon
Mm-hmm. Yeah. I wonder if there’s a way that you can sort of let them know to get their
product out a little quicker saying, hey, we’re already for it. Is that something that they could push to
use...
Steve Vestergaard
Yeah…
Dave Shannon
Your software to do that?
Steve Vestergaard
Absolutely, because they make a lot of money in rolling out and charging patent fees. And
so anything we can do…
Dave Shannon
Mm-hmm.
Steve Vestergaard
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
43
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
To speed up the process I’m sure that they would be happy with. We’ve intentionally not...
Dave Shannon
Have you spoke to—okay.
Steve Vestergaard
Well, that’s just what I was just going to say. We’ve spoken to them enough to figure out
what we need to do to get a licence, but in the last conference call I intentionally referred to this as
our secret skunkworks project. I didn’t mention what it was.
Dave Shannon
Mm-hmm.
Steve Vestergaard
The only reason I’m mentioning it now is because we’re close to rolling it out. But whether
rolling out to the magazines and to the press, or rolling it out to the patent holders, we want it to
work first. And so we’re trying to get all the glitches out...
Dave Shannon
Mm-hmm. Okay. And you have spoken to them is what you said about your system is pretty
much ready, other than you want to make sure you’ve got all your bugs out of the way?
Steve Vestergaard
We’ve spoken to them in terms of legalities in getting licences to use their technology.
We’ve intentionally not gone into detail on what we’re doing with JavaScript and everything.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
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FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Dave Shannon
Okay.
Steve Vestergaard
Now that I’m blabbing this on today’s call, I’m sure they’ll know about it tomorrow, but to
date we’ve been a little quiet.
Dave Shannon
Mm-hmm. Okay. Well, that sounds good. I’m still patiently waiting, as you are too, I’m sure…
Steve Vestergaard
Well, they say good things happen to people that wait, right?
Dave Shannon
Yeah. Yeah. Right. All right. Well, thank you very much. Keep up the good work.
Steve Vestergaard
Okay. So, Operator, looks like we’re probably out of calls here, so we can probably wrap up.
One of the things I like to say every call is it’s kind of intimidating to ask questions in this
type of forum. Both Fred and I welcome people to reach out, either by e-mail or by phone. Our staff
as well; feel free to reach out to our sales people. Go into Clipstream; pretend to be a customer if you
want to.
But we kind of learn from constructive feedback from our investors, and we really welcome
it, so feel free to reach out to myself personally or anybody else in the company.
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
45
FINAL TRANSCRIPT
April 14, 2016 — 4:30 p.m. E.T.
Destiny Media Technologies Inc. Second Quarter Results Conference
Call
Operator
Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today.
Once again, we’d like to thank you for attending. And at this time, we do ask that you please
disconnect your lines.
Have yourselves a lovely evening.
*****
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript
is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne
contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »
46