FINAL TRANSCRIPT
Destiny Media Technologies, Inc.
Second Quarter Results
Event Date/Time: April 13, 2017 — 5:00 p.m. E.T.
Length: 41 minutes
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FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
CORPORATE PARTICIPANTS
Fred Vandenberg
Destiny Media Technologies, Inc. — Chief Financial Officer
Steve Vestergaard
Destiny Media Technologies, Inc. — Chief Executive Officer
CONFERENCE CALL PARTICIPANTS
Hubert Mak
Cormark Securities — Analyst
Walter Schenker
MAZ Partners — Analyst
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
PRESENTATION
Operator
Thank you for joining us today on the call. 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’ll 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 actual results to differ
materially from those forward-looking statements. Such risks are fully discussed in the Company’s
filings with 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 nonGAAP financial measures are presented in the supplemental disclosures, and should not be
considered in isolation of or as 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.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Non-GAAP financial measures used in the Company’s presentation may differ from similar
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.
On today’s call are Steve Vestergaard, the Chief Executive Officer, and Fred Vandenberg, the
Chief Financial Officer.
With that, I’ll turn it over to Fred.
Fred Vandenberg — Chief Financial Officer, Destiny Media Technologies, Inc.
Thanks, Leonie. Our second quarter combines our lowest seasonal revenue with
expenditures that are more heavily weighted to the beginning of the calendar year.
In spite of this, we were able to maintain profitability for the year-to-date results. That
profitability is the result of increases in Play MPE revenue and a reduction of certain expenditures.
Quarter-over-quarter revenue—that is revenue for the quarter compared to the prior-year’s
quarter—grew for the fifth straight quarter.
Year over year, our independent revenue in the United States continues to improve, as it
has consistently for almost 10 years now. With that as a model for growth, we have grown revenue
with the Australian independent record labels, which saw an increase of 17 percent for the year and
19 percent for the quarter.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
While I might be oversimplifying it, this model relies on obtaining a threshold of popular
music by receiving major labelled content, preparing recipient lists, and then selling to independent
labels.
As we have substantial major-label content within Scandinavia, and in collaboration with
our local resellers, we added recipient lists in Scandinavia during the first half of this year. As a result,
we have seen revenue growth of 85 percent for the year and 400 percent for the quarter.
Now while these percentages are impressive, this segment is still at its early stages. In
Scandinavia, we hope to repeat the growth that we’ve seen over the years with our US independent
label revenue, which now represents the majority of our US revenue.
As we have mentioned, we are working on a full web-based release publishing tool which
we hope to leverage into obtaining greater major label content, and repeat this model in current and
new territories.
Overall expenditures year to date fell by 8.5 percent, which is due to reductions realizing for
the first quarter. These reductions come from a reduction in spending on Clipstream sales, marketing,
and patents.
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 us on the call today prior to long weekend.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So Destiny’s got two products, Play MPE and Clipstream, with Play MPE currently generating
almost all of our revenue. Play MPE is a secure system for delivering music to radio, and Clipstream is
a high-reach encoding, hosting, and reporting system which features a proprietary playback
technology based on the canvas tag and JavaScript.
So we’ve been pretty busy this quarter, and we’re proud of the progress we’ve been able to
make with both products, but also with the Company in general.
In particular, we are pleased with the new talent we’ve brought to the Company with two
new directors, which were voted in at our AGM in February. This diversity of talent among directors
and management has been very constructive, allowing the diversity of opinion and occasional creative
tension to steer the Company towards the best strategic business plan for long-term growth.
Mr. Cho manages a successful fund which specializes in the investment into microcap stocks
and brings invaluable public market experience, and his knowledge and experience with growing
technology companies is expected to be a real asset going forward.
Mr. Graber brings 20 years of direct software sales experience as a retired VP of business
development for Apex Software. We expect that he’s going to be able to help a lot with the discipline
of building out a profitable sales team and the sales process for both products.
We’ve also addressed a number of corporate goals this quarter to bring predictability to
recurring expenses, including negotiating a new five-year lease for our head office at really good
terms that are going to benefit investors.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
We’ve also invested effort in ensuring that contracts continue to be renewed well into the
future; that way we’re guaranteeing minimum revenue streams and predictable cash flows.
So our music industry revenue is seasonal, with Q2—the current quarter—being the
smallest, as the industry mostly shuts down for a month. So about a third of the quarter we’re not
doing very much; they shut down for Christmas. And our nonrecurring expenses, as Fred mentioned,
are the highest as we come into the new year.
So I’m quite pleased that staff was able to grow revenue for the fifth consecutive quarter
and MPE revenue by 4 percent while keeping expenses in check. So this should be a really strong
foundation to build shareholder value into the rest of the year.
So the new directors have become significant investors and are quite pleased with the initial
steps the Company took last year, and especially last fall, to continue building out Clipstream by
putting the bulk of development and marketing resources into Play MPE in the short term, as the
expectation is rapid investment in Play MPE should reflect quickly in growing market support of what
has become the dominant global service for distributing music.
So last year the back-end hosting service was rebuilt with new server software, and the
hardware outsourced to Amazon to create virtually unlimited scalability and better reliability. We
launched a new upload service last summer as the first step in a new suite of browser-based tools
that we could offer our customers.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
In the fall, we announced a new secure watermarked audio streaming technology that
immediately impacts on our billable usage rate.
Feedback from the labels has been extremely positive, as we’ve been able to allocate
resources to knock off new offerings from their wish lists. As we continue with our browser-based
tools, they’re excited about upcoming enhancements, such as our new reporting system.
With more than 3 million tracks and 80,000 users in the system representing 600 million
deliveries, Play MPE is by far and away the largest distribution system to radio, but the volume of
tracks represented a need for better efficiency and a better ability to mine large amounts of data.
The new reporting system tracks and adds activity not previously tracked or reported,
including e-mail opens and clicks. This information forms a critical feature in new music promotion
and increases the utility of the system for our customers that competition does not have.
The new information that customers are able to help—the new information customers are
getting are able to help them better market to radio, which directly affects the play rate, and in turn,
directly affects the revenues to the end consumer. We’ll be adding full-release publishing and new
label and list administration tools in the coming months.
Some customers have seen mock-ups of the release publishing system, and certain
customers will review prototypes and functional alpha products in June of this year. Full rollout to all
the customers for end-to-end publishing will take place in the balance of the calendar year. The
addition of the label and list management tools are expected by this time next year.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So our product roadmap also includes items beyond what I’ve mentioned here, including
some that I’m not even going to talk about yet. But as an example, level two reporting, and tools
that’ll help smaller labels market, which we expect to be able to charge for. So as we productize them
we’ll do it as an enhanced value-add.
In collaboration with recently added resellers we’ve added recipient lists in Scandinavia,
which as Fred mentioned has begun to show results and returns in that territory. New partnerships
have begun to impact distribution volumes. So our strategy has been to lock in our large network
advantage, keep our current high-margin recurring revenues, while emphasizing the growing tool kit
of features our customers want, that no one else offers.
So besides the investment in development, we focused heavily on sales and marketing with
an emphasis on sending staff to meet customers, potential new customers, and new partners face to
face in person. So we’ve always invested in industry trade shows and marketing tools like our charts
and our daily.plaympe.com site, but we’re adding an emphasis on face-to-face meetings to better
directly understand and address customer needs.
In the last three months we met with executives at the Taste of Hope, the industry’s largest
charity event, and met face to face with partners, customers, and potential customers in New York;
Los Angeles; Nashville; Scandinavia; and the UK. It’s been quite rewarding to see how quickly these
efforts to be reflected in growing industry support for 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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April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
It’s a real nice feedback loop as we ask them what they want and then we give it to them,
and then they start using the system more.
So to monitor Play MPE progress, I encourage you to follow our real-time statistics. And I’ll
try and spell this out here, but they’re at tinyurl.com/playstats. Again, tinyurl.com/playstats, and
playstats is all one word.
With Play MPE, revenues are being generated 24 hours per day, seven days a week across
all time zones. Almost every minute or every couple of minutes there’s a new song coming through
the system. Because most of our costs are fixed, new revenues are really high margin, so like I said,
the system is completely automated. Once the fixed costs are covered growth mostly goes to the
bottom line.
So our second business unit is Clipstream, which consists of an online video hosting system
and the new proprietary player. In the last conference call, I said that we were in testing with a new
version of our proprietary player, which I’m really pleased to announce we were able to release, and
the feedback on the improved quality has been very positive.
Our JavaScript-based solution has a number of advantages, but it had disadvantages with
less access to reliable timing in CPU and memory resources.
We’ve been able to make progress in eliminating the disadvantages with a number of new
techniques, including off-loading some of the work to the GPU and lighting up additional cores
through new multithreading techniques. So I’m really pleased to report that the player quality in the
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
desktop market is ready to sell. We’ve restarted search engine advertising to get feedback from early
customers.
Our frame rate and timing of frames is solid, improving the perceived motion video quality.
We use 62 percent less bandwidth with a 78 percent increase in quality by being the only Internet
hosting solution to offer HEVC.
So HEVC is new high-efficiency video codec used on 4K TVs. We’re the only ones to support
it over the Internet on browsers, and I encourage investors to visit tinyurl.com/hevc-bbc to see a
report on the advantages of this latest technology or what products like YouTube use now.
Our audio quality is much higher than standard streaming video with an ability to support
double CD audio quality. Our video is less likely to re-buffer with a lower bandwidth footprint, and
when you seek, the video starts almost instantly without hardly any buffering.
Besides adding features to our Clipstream encoding hosting reporting system, though,
there’s still a little bit of work to be done. Our main remaining development initiatives are on
improving quality to cell phones and tablets, where we have intentionally throttled maximum quality
because of such a wide spectrum of performance across thousands of devices.
So we already have a new version in-house here that’s not been released; it’s in testing.
There’s still quite a few bugs in it, but there will be a large noticeable improvement in quality when
this goes live.
"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. »
11
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So there’s going to be a few iterations of new players for … to handle tablets and mobile
over the next quarter, each adding new techniques to improve quality. And we’re expecting to see a
big jump over the next couple of months.
There’s been a lot of investment in development of Clipstream over the years. We’re close
to having the new player perfected, and with the protection of two dozen patents to keep competition
out we see this new cross-form platforms, a software-based way of delivering video, as having the
potential to be extremely rewarding to investors.
So on that note, I’ll turn the call over to questions. Thank you.
Q&A
Operator
Thank you. Ladies and gentlemen, should you have a question, please press *, followed by
1 on your touch-tone phone. If you are using a speakerphone, please lift your handset before pressing
any keys. One moment, please, for your first question.
Your first question comes from Hubert Mak from Cormark Securities. Hubert, please go
ahead.
Hubert Mak — Cormark Securities
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Hey, Steve. Just first on the Play MPE, I guess in terms of the UMG contract, can you just
kind of remind us how like long was that renewal? And is there a risk of it coming up and not being
renewed again? Or at least in terms of the terms having to be revised?
Steve Vestergaard
Well, I guess there’s always a risk. But I tried to allude to it in the … kind of my preamble
here. I mean that’s what we’ve invested really strongly in is supporting some of our bigger customers,
including Universal, and I personally don’t see a lot of risk.
Fred, maybe you can comment on when the current contract comes up, but we’ve been
with Universal since 2004. We’re directly engrained into their system. They have a number of
employees that their whole job description is just to use the Play MPE system.
And there’s no viable competitors that can do multiple countries like we can, or that have
the features that we can—that we have or have the security. So I see that as actually extremely lowrisk.
But in terms of the renewal date maybe, Fred, you can comment?
Fred Vandenberg
Hubert, the current agreement expires at the end of the current calendar year, so 2017.
We’ve … We meet with Universal regularly. There’s all signs to pointing to a renewal. I don’t expect
any kind of risk there. I mean there’s always a risk, but there’s no signs that would indicate that they
won’t continue to renew.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
In fact, I would say they’re taking very proactive steps into expanding their use of Play MPE
internally, and combined with their own development items, I think quite bullish on their continued
use and growth.
Hubert Mak
And then just to follow up on that. Like when you say expanding, like are you actually seeing
more aggressive use internationally in other countries outside of North America?
Steve Vestergaard
Yeah. Let me comment on that. So the current contract allows them to have a bit of growth
without it impacting revenues. But what it does is when Universal uses it more, even though we don’t
necessarily get to bill more they pave the path for new users from other labels, both the majors and
the independents.
And yes, in answer to your question, yeah, they’re investing heavily in expanding both
geographically, but also in terms of who the recipients are and the number of stocks (phon).
But, Fred, do you want to add to that?
Fred Vandenberg
Yeah. I mean I guess the—internally they’re structuring themselves so that they, we believe,
that they’ll facilitate growth. I think there’s a number of things that they haven’t done in the past, and
with new staff I think there’s things that they’re taking on that would show that I mean there is a
demonstrable increase in their use.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
But like Steve said, it doesn’t increase our revenue currently, but I think over time the
increased growth helps us sell in different territories, plus justify the increased fees—we have to
negotiate that—but all signs point positively to that.
Steve Vestergaard
Yeah.
Hubert Mak
Okay.
Steve Vestergaard
I think I’ve used this example before, but it’s like having a shopping mall. You put the
Walmart in there, it fills your mall with all the other retailers. It’s kind of the same thing here. We
need the gorilla to pave the path to bring the other labels in, and so one of our easiest ways to grow
is to go into new markets, which we have.
Fred mentioned the successes in Scandinavia. We’re seeing that in some of the other
markets. But you need the major in there first to kind of build up the demand.
Hubert Mak
Okay. And then switching over to Clipstream, it sounds like you guys are currently still in the
testing, or at least closer to finalizing the official version here. So can you give us an updated time line
in terms of when the—
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. »
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April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Yeah. So I’m actually extremely pleased that—the main disadvantage to JavaScript is
timing—JavaScript doesn’t really have accurate timing—CP usage, and memory. So on the desktop
we’ve got significantly more people getting either the first, second, or third quality, which all three I
consider adequate to reach to consumers.
We’re continuing to work on getting everybody to the first quality, but it’s mainly just a
performance issue. And the way we’re addressing it is we’re off-loading tasks to other cores. We used
to be limited to one core on the CPU. And also to off-loading stuff to the GPU, which is the graphics
processing unit, and then finally by being more efficient.
But we’ve done it one step at a time. And so the first step is we just fixed desktops. And so
I’m kind of I want to put a check mark next to it that most people in desktops are quite pleased with
the quality. It’s kind of the same or better than YouTube for most people. The audio is better than
YouTube, the seeking is better, and we’re less likely to re-buffer. The reason is that our bandwidth
footprint is quite a bit smaller.
Currently we’re throttling tablets and cell phones, and the reason is it’s hard for us to detect
the capabilities of your phone. In some—some tablets are almost like computers. Like I’ve got a
Microsoft Surface tablet that’s faster than most people’s desktops, but then on the other hand you
can go to like a really low-end tablet that’s like an e-book reader where memory is really limited and
CPU is really limited.
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April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So we’ve got an internal version that we’ve been working on since the last conference call
where I’m actually quite blown away with the improvement on the cell phone quality. So that
version’s still a little bit buggy, so it’s hard for me to predict when it’s going to come out. But in internal
testing the actual quality is way better.
Tablets are a bit of a different story in that because they’re so big if there’s a little
imperfection you notice it more, whereas on a cell phone because it’s small we can kind of get away
with little problems. So what I’m expecting is it’s going to take probably three more versions for us to
address cell phone and tablet. I’m expecting to have results by the next conference call. So by the
next conference call I’m hopeful that both cell phones and tablets are going to be equivalent to the
quality that we’re seeing on the desktop.
But where the risks are—I think we’ve mostly beat timing; we’ve mostly beat CPU—where
the risks are is in memory. Certain devices have very limited memory, and so in some cases where the
memory is too low we may decide to just not support that device.
But so in terms of timing we’re doing search engine marketing now, but it’s mostly not so
much to get big sales—we expect to get some sales—but as much to get feedback from the customers
on what they want; what’s working; what’s not working. Where we’ve held back a little bit is on
features for the cloud-hosting system. So we’re going full-bore on improving the player. We’re going
full-bore putting resources after Play MPE. We’ve actually pulled back a little bit on adding features
to the clouds just because it’s going to take longer to get a return there.
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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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Hubert Mak
So it sounds like there’s still some improvements to be made. So what—and obviously you
just kind of talked to you’re going to have some better update here by next conference call—so what
is the time frame in terms of your expected actual commercial launch? And are we talking Q4? Or sort
of fiscal year—
Steve Vestergaard
Yeah. So the cloud-hosting system is kind of ready now, but it’s a bit of a commodity
business; everybody is kind of offering the same thing: you upload your video; it encodes it; you get
the reporting and everything. We’re better than everybody else on the reach and the reliability and
all that kind of stuff because we’ve got—we’ve leveraged our experience with Play MPE to create a
really super robust back-end, but that’s not something you can really market; that’s not something
where you can talk about advantages.
Some of those other commodity-offer companies have features. They’re not rocket science
to build; things like just having departments where you can have a master billing account and different
employees have different rights and different permissions. Some of that stuff’s not being built out
yet.
And so for us to be really competitive with the commodity-hosting solution, we do need to
put some effort into that. But with the proprietary stuff, so the stuff where we really shine, where we
can really license and really run with it, where we think JavaScript video is going to have so many
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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
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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
advantages that we can really make a big impact, to have that ready—I wouldn’t say 100 percent—
but it’s going to be pretty polished by next quarter; like we’re making really good progress.
Like I said, the version that’s in-house is a little bit buggy, but I’m really blown away by the
improvement quality on cell phones versus what’s on our current demo site.
Hubert Mak
Okay. I just want to be clear on like what you just said. So in terms of actual commercial
launch, you need all the other peripherals or platform support before your actual core technology,
but you are suggesting that you’re looking for all that to be completed by—within Q3?
Steve Vestergaard
Yeah. So we’re launched now. So you can come to our website and you can buy the product.
We’ll happily take your money. And like I said, the desktop I’m quite proud of. I prefer you get quality
one than quality three.
Before some people were getting like quality six, so we’ve kind of beat that hurdle. So that—
we’re going to continue to improve the desktop, but we kind of think we’re there to start making
money off it.
But we’re a little weak on the cloud-hosting system. We don’t have as many features as
some of our competitors. But on the cell phones and the tablets, we’re not good enough yet.
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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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FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So we’re looking towards Q3 and Q4 to really lock that down. But I’m expecting by Q3 the
tablets and cell phones are going to have similar quality to what you see on desktop on our current
demos, like if you go to our demo site now.
Hubert Mak
Okay. And then just last question. In terms of the sales and marketing, how are you guys
approaching marketing the Clipstream in terms of are you using partnership? Direct or—
Steve Vestergaard
Yeah. So currently—we talked through our strategy, brainstorming with the new directors,
that kind of stuff—currently we’re putting most of our sales and marketing efforts into Play MPE.
With Clipstream, it’s search engine advertising, which is surprisingly effective because—and is
surprising with the different kinds of people that come in.
But as we really go full-bore with it, when I’m happy with the cell phone and the tablets,
we’re going to be selling into partners. So rather than sell to realtors I’d rather sell to a real estate
site—that kind of thing—selling our API out, and then targeting certain verticals. So like take
advertising as an example as a particular vertical, we would be going to—we wouldn’t be going to
streaming video tradeshows; we’d be going to advertising tradeshows. We wouldn’t be advertising
to a tech magazine; we’d be selling into an advertising journal, that kind of thing. And so what we’re
going to try and do is identify the half-dozen verticals that kind of make the most sense.
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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
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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20
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
But where we’re at right now is our quickest return on investment is sales and marketing
with Play MPE. And we really started doing that, I’d call it, August/September of last year, and pushing
resources into Play MPE has been surprisingly effective. It may not have—it doesn’t show up in
revenues overnight, but the industry support that’s coming back is just phenomenal. We’ve been
signing up new partners and companies that are sending us business. And that’s all going to bear fruit
over the next six months or so.
Hubert Mak
Okay. Thanks.
Steve Vestergaard
Thank you.
Operator
Thank you. Ladies and gentleman, as a reminder should you have a question, please press
*, followed by 1.
Your next question comes from Walter Schenker from MAZ Partners. Walter, please go
ahead.
Walter Schenker — MAZ Partners
Hi, Steve. Two questions, comments; first on Play MPE, for the last years, multiple years,
there have been advances taking place, but they haven’t been—haven’t appeared in revenues, either
due to the structure of a contract; this, that, or the other thing. What is it going to take, or given your
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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
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou
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April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
last comment that we should see it in the second half of the year, to get a revenue growth rate in Play
MPE beyond the low-single digits?
Steve Vestergaard
Okay—
Walter Schenker
Or maybe that’s just it’s faded to. You can do that one first.
Steve Vestergaard
Yeah. So I’m going to let Fred comment after I’m finished here. But you’ve got to—the first
thing to understand is we’ve got a pretty sweet deal right now. And the high margins from Play MPE
are a little bit obscured because we’re taking our profits and reinvesting them in R&D and Clipstream.
But we’ve got a pretty good business here, we don’t have a lot of competition, and it’s business that
we want to keep.
So a lot of our initial development is defensive, making sure—I was asked if the Universal
contract is going to be renewed. Yeah. The reason it’s going to be renewed is because we give them
what they want. They send us a wish list of new features they want, and we build it out.
But in terms of new revenue growth, I see revenue growth in promotions. They spend 10
times as much in promotion as they do in distribution, so we’ve got some ideas on that. Geography,
which is a really big deal. And Fred kind of alluded to it, but we’ve had a problem with staff turnover
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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
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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22
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
at some of the bigger labels. And so you think you’re going to have a big initiative, and all of a sudden
you’re dealing with brand-new faces.
So we’re doing face—we’re travelling all over the place visiting face to face with the
decision-makers, and we’re getting the muscle to be on our side to help us go into new territories.
With their current contract they’re incented to do that because it doesn’t necessarily cost them any
more, but they get a big benefit.
Getting more people to use it in the organization. So we talked about browser-based tools.
So instead of just going through their central distribution system, to go through their promotions staff
all over the—like the more people that have encoder tools, the more money we’re going to make.
Bigger recipient lists, so maybe going into recipients other than just radio stations. Radio
stations are the tip of the iceberg.
So there’s kind of a one-two punch. I see development as being mostly defensive, but we’re
investing in sales and marketing and travel and visiting people and promotions and stuff like that.
That’s where we’re going to see a bit of growth, but I’ll let Fred add to my comments here.
Fred Vandenberg
I think we’ll see some organic growth with Play MPE that, like as you said, that it will be in
the single digits. But a lot of the development in terms of the technical development, the software
development we’ve taken on over the last sort of 12 to 18 months has been more setting us up to be
able to release new product ideas, new developments that will result in incremental revenue.
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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
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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
So they themselves haven’t resulted in heavy positive influences in revenue, but they
facilitate things that will. And I think one of the things that Steve had mentioned is even just a fullrelease encoder that we’re working on, a release publishing tool, and that’ll take the balance of the
year to complete. And we expect to leverage that into marketing opportunities that will grow
revenue. And I think a lot of times that revenue growth we’ll see it more step, like so you’ll see gains
over time, but you’ll also see steps in increasing revenue; at least that’s our plan. And with that, once
that’s complete we’ll be able to add on new product ideas.
From other nontechnical, non-software-based product ideas, we’re working on some
agreements behind the scenes and some product ideas behind the scenes that we’ve tested out and
seem to work. And you do see them in growing independent label revenue that we’ve seen positive
results in over the last year, year and a half.
So I think a little patience, but I do see Play MPE revenue growing more than single digits.
Walter Schenker
Okay. And second question; having a—on Clipstream having a product that’s great on
desktops might have been viable or someone might be interested in it god knows how many years
ago, but if you can’t solve or you haven’t solved the problem for both cell phones and tablets, what
type of customer might even have an interest? I mean it seems we’re still steps away from making a
commercial product because if you can’t handle mobile, what advertiser cares?
Steve Vestergaard
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April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Yeah. So you’ve got to think of it as almost like concentric rings. So at the centre everything
has common problems, so whether it’s a cell phone or tablet or Internet TV or the desktop, they all
have problems with timing; CPU; bandwidth; memory. And we have to address those problems for
everybody.
So we took it as a two-step approach, and we’ve addressed it for everybody. So the problems
that we’ve solved on desktops also solve those same problems on cell phones, but on cell phones we
have additional problems. One is we don’t get accurate information back all the time. Like for
example, the device might say, hey, I’m an iPhone, but it doesn’t tell me are you an iPhone 6 or are
you an iPhone 1. And so we don’t necessarily know the capabilities of that device up front.
And so what we’ve been doing is throttling everything; going down to the lowest common
denominator, so we want it to work on every phone. But we’re giving everybody bad quality just to
keep that cross-platform.
And where we really run into problems is with memory. Like some devices are really
memory-limited. And you would think that over time the devices would get better and better, but in
some cases it’s going backwards because consumers seem to care more about cost and how big the
device is and how quickly it burns memory or it burns the battery. And so some of the manufacturers
have kind of gone backwards and they’re making the devices wimpier, so less CPU, less memory.
We didn’t try to solve the problems with cell phones and tablets at all until we got this
desktop version out. But you guys are kind of on a 60-, 90-day time lag in that I’m seeing things
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25
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
internally that we haven’t released yet. And so internally it’s going to take a few iterations to get cell
phones and tablets perfect, but internally I’m seeing a version that looks great on the cell phones
where it isn’t throttling; it is detecting.
Basically we try to hit the CPU or try to hit the memory—we figure out what the resources
are—but where we’ve been able to successfully off-load things and we’ve been able to rewrite our
architecture to deal with devices that have really, really tiny memory footprints.
So that version—I shouldn’t really put a time line out—but I’m thinking the version I’m
seeing right now will be probably releasable in about a month. But for you guys to be happy to have
something similar to what we have on desktop, I’m thinking probably more like three months. And
that’s why I said by the time I have the next conference call I’m expecting the cell phones and tablets
are going to have similar quality to what we’re currently offering on desktop.
Walter Schenker
And once you get that quality across the three formats, does that mean that revenues follow
relatively quickly, albeit from a low base? Or does that mean that it still takes you, because you’ve
been sort of proselytizing this coming for a long time—
Steve Vestergaard
Yeah.
Walter Schenker
—so there’d be six to nine months to get a customer?
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FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
Steve Vestergaard
Yeah. So there’s kind of two businesses in a way. The cloud-hosting product doesn’t need
the Clipstream player. So we could do the cloud-hosting product and just do what everybody else
does—just use like H.264 or something; forget the HEVC; forget the JavaScript—and take all the
inferiorities of what the commodity hosting is offering and just kind of play with. And that’s a nice
business. We could choose to go into that business, and we’re still missing a handful of features
mostly to do with billing and reporting.
But that’s an easy business to make money on. It’s a commodity business, though, so it’s
kind of like a parking spot. Every parking company can make money because people just go to
whatever their closest parking spot is, but one parking spot’s not necessarily better than the others.
Where we’re going to get the big win is with licensing the JavaScript player lists video.
It’s a really big deal to not use a chip, to not use an old standard that is 10 years old, and to
be completely cross-platform; to be able to add new features that customers want. They want
security, they want watermarking, pop, it’s in there; if they want higher audio quality, pop, it’s in
there. And we can build something today that instantly is cross-platform tomorrow like all across the
spectrum.
But we need the hosting system to show it, so we need to show it in action. So in a way the
hosting system you can almost think of it as a display case where we’re displaying our jewels. Our
jewels are the JavaScript. So in terms of the real big win, the quickest win would be to license to
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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
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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27
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
somebody big. So like let’s say a YouTube or somebody saw an advantage in using JavaScript instead
of H.264, that’s the kind of licence that would be the home run.
Walter Schenker
Okay. And therefore it requires both an upgrade of your hosting and an upgrade of the
breadth of devices it uses?
Steve Vestergaard
A good way to think of it is you can sell a car that’s not painted, but it’s easier to sell if it’s
got paint on it. And it’s kind of like that. We’re going to keep hammering away at it. The more features
we build out; the better we make it; the better the quality, the easier it is to sell.
But I was asked earlier when it’s going to be commercially ready. It’s commercially ready
now, but it’s commercially ready with warts (phon) especially on cell phones and tablets.
Walter Schenker
Okay. But you would be disappointed—to get you to make a forecast—if in fact you have
not both upgraded the hosting and solved the issues for cell phones and tablets and start having
commercial sales, so you get the whole package sometime this calendar year?
Steve Vestergaard
I’m even thinking the fiscal year, which ends in August. The good thing in terms of checks
and balances is we’ve got a good Board of Directors that are keeping us accountable.
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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
liabilities which may arise out of or result from any use made of this transcript or any error contained therein."
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28
FINAL TRANSCRIPT
April 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
If we’re not able to be in a position where Clipstream’s going to make us money, Clipstream
is going to get cut off at the knees. And so we need to make this work over the next quarter or two.
Walter Schenker
Okay. Good for your board. Okay. Thank you, Steve.
Steve Vestergaard
Yeah. Yeah. Thank you.
Operator
Thank you. There are no further questions at this time. Please proceed.
Steve Vestergaard
Okay. Well, thanks, everybody, for joining the call. I know it’s Easter weekend. I hope you
guys all have a good time.
And I know there’s people that are listening to this on a rebroadcast or reading the
transcript, feel really free to reach out to either Fred or myself. We invite enquiries from investors.
That’s how we learn, and we invite constructive criticism.
That said, if you don’t reach out to us, look forward to the next call in a few months.
Thank you.
Operator
Ladies and gentlemen, this concludes your conference call today. We thank you for
participating and ask that you please disconnect your lines.
"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 13, 2017 — 5:00 p.m. E.T.
Destiny Media Technologies, Inc. Second Quarter Results
*****
"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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