DBO.TODBO.TOTSX
Loading
Trevor Heisler : Hello everyone, I am Trevor Heisler from MBC Capital Markets Advisors and welcome to the D-BOX Technologies Fiscal 2024 Fourth Quarter and Year-End Earnings presentation. At the end of the presentation, there will be a brief question-and-answer session. Before turning things over to Sébastien Mailhot, President and CEO of D-BOX, I would like to remind you that today's presentation will contain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements involve risks and uncertainties and undue reliance should not be placed on such statements. For additional information, please consult the MD&A for the quarter, the Risk Factors section of the Annual Information Form, and D-BOX's other filings with Canadian Securities Regulators. D-BOX does not undertake to update any forward-looking statements, and such statements speak only as of the date made. I would also like to point out that all dollar amounts in this presentation are in Canadian dollars unless otherwise specified. I will now turn the presentation over to Sébastien. Please go ahead.
Sébastien Mailhot : Thank you, Trevor, and hello everyone. Fiscal 2024 was a record year for D-BOX. We achieved all-time highs for rights for use, rental and maintenance revenue, system sales revenue and total revenues. We had full year total revenues of $39.6 million, which was up 16% from the prior year and a total of 86% over the last two years. System sales revenue reached $30.9 million, an increase of 21% from the prior year and nearly doubled the amount from two years ago. Compared to fiscal 2023, system sales to the simulation and training market increased 28%, while system sales to the entertainment sector were up 18%, with growth coming from the theatrical and sim racing segment. Right for use rental and maintenance revenues grew to $8.7 million, which was an increase of 2% from the prior year and 56% from two years ago. The growth in fiscal 2024 was due to our expanded theatrical footprint, despite a weaker slate of D-BOX encoded movies in fiscal 2024 compared to fiscal 2023. Our focus on driving profitable growth was clearly evident this past year. We had adjusted EBITDA of $3.1 million for the year, which was up 71% year-over-year and 231% over the past two years. We had strong continued progress toward our stated goal of reaching a 10% adjusted EBITDA margin. As you can see on the slide, our adjusted EBITDA margin in fiscal 2022 was 4.3%. In fiscal 2023, it was 5.2%. And in fiscal 2024, we improved this to 7.7%. We still have work to do on this front, but we are pleased with our progress, especially given the headwinds we face, which included a macro-economic environment characterized by inflation and higher interest rates, as well as the negative impact the Hollywood Guild strike had on our results in the second half of fiscal 2024. Looking at our bottom-line, we had record net income of $1.1 million, representing a year-over-year increase of $2 million and a two-year increase of nearly $3 million. Most of our record revenue and profitability in Fiscal 2024 were generated from commercial market, particularly from the theatrical simulation and training and sim racing segment where our execution capabilities remain unmatched. I am very proud of our financial performance in fiscal 2024 and over the last 2 years. In fact, I don't believe there are many Canadian micro-cap that can point to a more dramatic improvement in both their top and bottom-line over the past two years. You will recall that our third quarter performance was adversely affected by the Hollywood Guild strike, which resulted in many movies having their box office release delayed, causing a lot of uncertainty within the industry, which in turn prompt some of our cinema partners to defer capital expenditure. While the aftermath of the strike continued to impact our Q4 result, we did see a strong rebound in the fourth quarter compared to Q3. In the fourth quarter, we had total revenue of $10.2 million, which was up 26% compared to Q3. We were very encouraged to see our right for use, rental and maintenance revenues bounce back with a 50% increase compared to the third quarter, while our system sales revenue increased 21% quarter-over-quarter. Our adjusted EBITDA increased [88%] (ph) to $619,000 compared to the third quarter. And we had a net profit of $620,000. While we are happy with our fourth quarter result, our system sales, total revenue and adjusted EBITDA were down compared to the very strong fourth quarter we had in fiscal 2023. We continue to expand our theatrical presence, adding 111 net new cinema screens to our footprint in fiscal 2024 and bringing our total screen up to 929 by the end of March 2024. We continue to focus on reinforcing our leadership position in this market and expect to reach 1,000 screens within the next 12 to 18 months. Subsequent to year-end, in April, we introduced a new luxury compact haptic seat at CinemaCon, along with a racing offering for theatrical exhibitors, which we should augment future sales in this segment. We are also looking forward to the continued rollout of F1 arcade venues by Kindred Concept. After opening their first two locations in England in [November 2022 and November 2023] (ph), they opened their third location in Boston, Massachusetts in April of this year. Their newest venue features 69 D-BOX equipped racing simulator designed to offer the experience, excitement and the full motion of a Formula 1 car as you drive around the world's most iconic tracks. The fourth venue is coming soon with the opening of their Washington, D.C. Location with 80 simulators, slated for the fall of this year. Next up after that will be at Las Vegas, Nevada venue with 120 simulators opening in 2025. As a reminder, Kindred concept has planned for expanding the F1 Arcade footprint to 30 D-BOX-equipped venues over the next few years. In the simulation and training market, we are noticing a few trends that we are well positioned for. The first trend has companies switching from static simulators to simulators with integrated haptic. While the initial investment may be higher than static simulators, the safety and training benefits of haptic-equipped simulators outweigh the costs. The precise synchronization between motion and visual immersive in a realistic environment that static simulator can't match, leading to improved training experiences. The next trend we are seeing is whereby initial training is being done at the desktop with chairs equipped with haptic. This helped to keep cost down for earlier level of training and some application, particularly since it's enabled remote training before moving on to larger, more sophisticated simulator for certification. And the third trend we continue to see is school simulator being built on smaller footprint such as 4 feet by 6 feet. The smaller footprint are less cumbersome and allow more simulators to occupy less space. D-BOX equipped simulators serve as robust training instruments in various fields. We see strong opportunity in the heavy equipment and construction sector, as well as driving in general and flight simulation. Looking ahead, we remain fully committed to accelerating our profitable growth trajectory. By concentrating our effort and resources on fewer markets, we look to build more dominant market position in our three key commercial segments and unlock greater strategic value. On a cautionary note, although the Hollywood Guild strike concluded last year, some lingering effects are expected to persist over the short term. This, combined with [constraint] (ph) -- uncertainty around the geopolitical and economic environment, could potentially result in a softer first half of fiscal 2025 for D-BOX. For the theatrical sector, we do believe the worst is behind us as the industry navigates a transitional period ahead of an expected rebound. On that note, I would like to take the time to answer some of the questions submitted by our investor. I will ask Trevor Heisler from MBC Capital Market Advisors to read the question for me. Please go ahead, Trevor.
A - Trevor Heisler: Thank you, Sébastien. The first question is, with your revised strategic plan focusing mostly on theatrical, sim racing, and simulation and training markets, does that mean that you're leaving the home entertainment market?
Sébastien Mailhot: Thanks, Trevor. We will continue to support our customer in the home entertainment market. While we still believe in the potential of this market, we have recently announced to our reselling partner that we will not be selling system to new customer after a transition period. This decision was taken to focus our energy in this segment. We are seeing more market readiness and short-term potential. As I said earlier, most of our record revenue and profitability in fiscal 2024 were generated from the theatrical, sim racing and simulation and training markets.
Trevor Heisler: Thank you. Your next question. You referenced potential lingering effects from the Hollywood strikes last year, but your rights for use, revenues, and system sales to that sector were both up in the fourth quarter. What are the lingering effects, and why do you expect them to impact results in the first half of fiscal 2025?
Sébastien Mailhot: Thank you. Right for use revenue are up because of our increased footprint that is balancing a lower box office VS a normal year. We know that some 24 movies have been delayed, and a few have been postponed to 2025. South of the border, movies brought in just $128 million over Memorial Day weekend, making the worst U.S. Domestic box office showing in 26 years. Box office is targeted for 2024 calendar to be 10% lower than 2023 calendar. We are not certain how this may impact our result at this time. We have seen some theatrical customer be more cautious in their capital spending. With the uncertainty in the sector and the economy overall, we thought it was appropriate that we caution investors about a potentially softer first half of fiscal 2025.
Trevor Heisler: Great. You grew your theatrical footprint by 111 screens in Fistful 2024. While that's an improvement over the prior year, are you considering ways to speed this up? Could you switch the pricing dynamics so that the seats are sold at a discount and you recoup more from rights for use?
Sébastien Mailhot: This is a good question. While there's some -- there might be some financing opportunity in the market that would accelerate growth, these projects increase the pressure on our liquidity and come with an increased risk for a company of the size of D-BOX, mainly in a market where some theatrical exhibitor have a more fragile balance sheet. We are always looking at the opportunity in the market to accelerate growth, but not at the expense of a riskier strategy.
Trevor Heisler: Your next question. On January 17th, 2023, the company issued a press release regarding the Mercedes Multi-Purpose Platform Deal and stated that D-BOX will develop and commercialize the Multi-Purpose platform by February 2023. However, in our fourth quarter MD&A, we stated that the launch of the Mercedes-Benz and Mercedes-AMG multipurpose motion platform are expected during the coming fiscal year. Can you please explain the timing difference between these two disclosures and has this product not been completed yet?
Sébastien Mailhot: Well, thank you for that question Trevor. Unfortunately, D-BOX had to readjust its commercialization strategy. We will now be commercializing with new selected resellers, and more impactful revenue should appear starting in Q2 of this current fiscal year.
Trevor Heisler: How much revenue did the Boston F1 arcade location represent, and when did you book that revenue?
Sébastien Mailhot: We book the revenue when we sell our system and that would normally happen in the six months prior to the opening and a location like F1 Arcade can generate revenue between $200,000 up to [$750,000] (ph).
Trevor Heisler: The rollout of F1 Arcade locations seems very slow, one or two locations a year so far. Are there plans to speed this up and is there anything D-BOX can do to help speed this up?
Sébastien Mailhot: We would love to have -- as many as soon as possible but D-BOX is not in charge of the rollout but we are happy to be the haptic provider for this exciting venue. F1 intention was to open a few to show and demonstrate the concept and accelerate after, but they control the timeline.
Trevor Heisler: Understood. And our last question, combined management and the board own less than 2% of outstanding shares. At current and recent share prices, why aren't insiders buying shares and why doesn't the company buy back some of its shares?
Sébastien Mailhot: So first, Trevor, I want to say I do agree and align with the market that board members and executive needs to own some shares. I personally own a little less than 2 million shares. Referring you to the box official document, there's a share ownership policy for board members and one official we put in place for executive in the coming month. Also, we need to remind as well that timing of those purchases need to be aligned with market governance, structural blackout projects such as the 18 month strategic process, and of course timing of some PR.
Trevor Heisler: Okay, that's all we had for questions, Sébastien.
Sébastien Mailhot: So thank you Trevor. Thank you everyone and hopefully you're going to be as happy as with the result and let's make sure we're continue to work really hard to continue that growth. Thanks for sticking with D-BOX.