D-BOX Technologies Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
November 15, 2024

Key Takeaways

  • DBox reported a record quarterly performance with EBITDA more than tripling year‐over‐year and net income rising over five‐fold on robust revenue growth.
  • Year‐to‐date EBITDA margin reached 15%, up 400 basis points from last year, reflecting enhanced cost discipline and mix improvements beyond top‐line gains.
  • Despite a soft market and a C$1 million impact from exiting direct‐to‐consumer hardware, system sales delivered 21% growth in theatrical & sim racing and 3% growth in simulation & training, while royalty revenue climbed 12%.
  • The company has achieved positive net income on a rolling 12-month basis for five consecutive quarters and generated C$3 million of operating cash flow year-to-date, underscoring sustainable profitability.
  • Following its recent debt restructuring, DBox is exploring various capital allocation strategies—reinvestment, debt paydown, shareholder returns or acquisitions—to leverage its newly available liquidity.
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Earnings Conference Call
D-BOX Technologies Q2 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

Good morning, everyone. Welcome to the DBOX Quarterly Earnings Presentation for the quarter ended 09/30/2024. I am Elizabeth Hamowi, Investor Relations, and joining me today is Sebastien Mayotte, President and CEO of dBox. He will be taking you through the results for the quarter in a moment and address some of the questions we received. Before we begin, I'd like to remind everyone that certain statements made during today's call may be forward looking and are based on our current expectations and assumptions.

Operator

These statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. For further details on these risks and reconciliation to non IFRS measures, please refer to our public filings available on the corporate website and on SEDAR plus With that, I will now turn the call over to Sebastien Maillette to begin with a review of the company's performance for the quarter. Go ahead, Sebastien.

Speaker 1

Thank you, Elizabeth. So hi, everyone. I'm really pleased to be there. So as a CEO, sometime we have ups and downs, but definitely, I'm really proud to be with you and present the result of the this quarter. This was an exceptional quarter for DBOX, marking the best performance in a company's history on several metrics.

Speaker 1

We believe this is a confirmation that our strategy is effective and our decisions are paying off and delivering results. As you can see, there is growth on the revenue side on the system. You definitely and we had discussed that in the past that as a as a certain level of the business, preferably would jump higher. So you see that multiplication on the EBITDA is more than triple. And more and often, after after last year doing their first year ever in net income, Rally pleased as well that that net income level has multiplied up more than five times.

Speaker 1

It shows as well that all the significant impact of all the businesses on the profitability with growth in every segment. Furthermore, we want to emphasize that it's not just top line growth that's driving the margin. And again, always to repeat, looking at last year results, while sales have been relatively flat, we are still able to drive efficiency with now year to date EBITDA of 15%, up 4% year over year. Let's move more on the VTL revenue. So first, let's remember our commercial focus as we know.

Speaker 1

So we have to we are playing in the entertainment market when we have this segment of theatrical and as well as sim racing and in the more industrial, we are having the simulation and training. So on the detail, we achieved record sale despite what remains a soft environment, really important to remember, and despite 1,000,000 impact of exiting the direct to consumer hardware market as previously communicated. If we take a look at system sale and if we strip again out the direct to consumer figures, we had growth in all three key commercial markets. So theatrical and sim racing together are up 21%, and simulation and training are up 3%. If we give a bit of color, definitely theatrical has been mostly to consume the rollout with our current partners and remembering that our focus, again, in theatrical is definitely the domestic market, so US and Canada, but as well Europe.

Speaker 1

On the cement train, definitely, our partner are continuing to grow, but one of the segment that we're always remembering that has definitely some good traction is all sim racing centers, so commercial area where people are putting simulator to be able to to wheel the real life racing. On the cement train, again, remembering we're mostly in the driving and as well into heavy equipment, the growth has been coming by consuing order for current customer. On Dutch royalty, again, we benefited from both the increase of the box footprint. As we know, we're adding more than 100 screen a year and the strong success of Deadpool and Wood Marine that kill it at the box office. All these factors combined together help us to generate 12 revenue growth.

Speaker 1

Moving to the next slide. So doing one good quarter is really good, but as we know, what we're trying to get is to have a sustainable, profitable growth. So while we are proud of this quarter, we want underscore it's important to look at our business from a year to date on the long term perspective. In fact, looking through this lens, the company has been consistently differing positive net income on a rolling less twelve month basis for the last five quarters. So I know shareholders have been more than patient after twenty years, but now we're getting at that level to bring sustainable profit profitability.

Speaker 1

While we have been driving positive EBITDA for much longer, we have achieved and surpassed revenue required to drive a positive and solid bottom line. As you know, any company, it's important. We have some salary to pay. We are operating in money country. But well after that, you are able to drive revenue above your cost structure.

Speaker 1

That's where our profitability improve, and that's why we like all those results. Next slide, please. Another thing that happened, as you know, is at our last AGM, so shareholders meeting, it resulted that there's been new independent director that has been put on the board. So we now we have a refresh board and as well with with additional expertise around the table. This is really important.

Speaker 1

As you know, DBOX is a complex business operating in multiple countries so that range of expertise from governance, strategy, finance, marketing, and operation is really key for the success of the business. We still have we had the one of the member, Srinka Vekic, that was nominated but unfortunately had to step down as a recent appointment to another role, unfortunately prevented her from serving on the board of a publicly traded company. We have started a search for the replacement. So right now, as you're saying, and I see that positively, all new board bring fresh eyes to the business, and we have started the onboarding of all new members. And, again, I'm really happy so far.

Speaker 1

So with our positioning into the haptic market, our commercial positioning, again, the focus of what you were saying, theatrical, sim racing, and professional solination. We are paying more time with the board, but I'm really happy with the discussion and the alignment we have found together. But, of course, we'll have more discussion, and I look to the board to bring, of course, the all to those tweaking and wisdom that can continue to improve the business moving forward. Last thing as well that is important, it's it's important we're all looking together with the board to continue to enhance governance and driving value for all stakeholders. Next slide, please.

Speaker 1

So turning for key priority. As you know, with that all that strategic pivot that we do, we have announced previously the arrival of Jean Francois Gagnon, our new senior vice president, and he started the onboarding in q two, and he's gonna gonna be leading the company into commercial effort. One of the things that we did as well is to combine the sales and marketing position under one leader, again, to improve the efficiency and the impact of our action. Another thing as well that is important is the cost discipline and other efficiency that we drove. So we increased our cash flow from operation.

Speaker 1

Note that we generated 3,000,000 year to date. In our recent debt restructuring, we are gaining greater flexibility. We are currently assessing our capital allocation strategy, looking to support growth across key markets, maintain a strong balance sheet and exploring other opportunity. Yes, at shareholders, we are now happy to be that situation about being able to drive revenue, additional cash, and to be able to consider a new option. That's a nice position to be in.

Speaker 1

So to comment a bit on our h two, our fiscal year 2025. So, definitely, as you know, we're not providing guidance, but I'll bring you some kind of covers. So the good news is, as you see, the industry is getting momentum. So if we think about theatrical, COVID is behind. The strike is behind.

Speaker 1

So that's why we see the with the movie slate, everything is improving. So that's really important. Seconding as well, there's more visibility for some of those segments. So so, yes, we have challenges. It's still some lingering effect, but it's positive about what we see the business going.

Speaker 1

Again, movie slate, so we all feel that if you look at various article in the newspaper, people feel feel really comforted confident and happy with the movie slate moving into calendar twenty five and beyond. We are back at normal time in the theatrical industry. And as well for all other segment as well, the visibility that we're having right now is considered to push a consumer buying more. This concludes our presentation. I'll be happy to respond to question we have received following our earnings release.

Operator

Thank you, Sebastien, for the highlights on the quarter. Let's go through a few questions. So the first is asking if you can speak a little to the level of profitability seen in the quarter and the impact specifically coming from royalties on the theatrical systems?

Speaker 1

Excellent. Thanks, Elizabeth. So first, it's true that the right per use has an impact can have an additional impact, right, on the profitability. So as you know, you see that the the the level is higher, and, of course, the cost structure won't be changing. So when we have that, definitely, it'll be a higher rate to do it.

Speaker 1

It had an impact. But it's not just yet. So on top of that, definitely, as we know, the profitability is for the increased time line, so our growth of sales as well the mix of product had an impact. So we had a positive mix that drive as well the gross margin. And as well, we discussed that we cut out of some business in the past of the direct to home hardware business that has lower margin.

Speaker 1

And, of course, last thing but not the least is definitely with the construction, higher level, definitely our expensive or proportionately is higher. So, yes, right for use is there, but there's other business element as well that are contributing to this. We do believe as well that as the revenue will continue to grow, the profitability should continue as well.

Operator

Okay. For our next question, with a refreshed board, can you provide any insight on potential impact to the current strategy, either in the short or in the longer term?

Speaker 1

Thanks, Zemet. So really important. So as you know, a company like DBOX has to transform all the time, and I think same thing as well for a board. So we had a good board for that for up to four years. And definitely, with a new strategy, a new direction, and again, sometimes as we make change, new eyes are welcome.

Speaker 1

So I think the first the change of board members is something that is beneficial into a company, and this is the first thing. Secondly, as well, so we know, so Abtech, commercial market, our segment, I think this is pretty rock solid. I said earlier, we have started the onboarding, so I like this discussion we're having. So the purpose of the board is definitely to drive governance, but the additional skills that we bring to the plate as well will contribute to, of course, challenging the executive, looking at things that can create short term and long term value, and I see that positively. So, again, couple of weeks down the road, I like the discussion, like the alignment.

Speaker 1

I like the change that has been made, and definitely looking forward to see how that new mixture is gonna be bringing some sparkle to benefit and improve the box strategy plan.

Operator

Okay. Our final question with the improved economics of the business, in particular cash generation, what are you planning to do with the available liquidity?

Speaker 1

So thanks again, Elizabeth. So good news. So we have cash, and we can take options. So to be honest, right now, I have nothing to announce. But, definitely, right now, that we're saying again that the the box in a situation that is not just having positive EBITDA and profitability, but generating discretionary cash flow.

Speaker 1

So that's where they become interesting at how we can benefit shareholders, the strategy plan, but as well as shareholder value. So, of course, things that like, couple of things that might be on the play that I'm not announcing anything, but that's gonna be part of the discussion in the upcoming weeks with the board is definitely okay. With your additional cash, do you increase the speed of growth? Do you want to reimburse debt? Are you considering to return that to shareholders?

Speaker 1

Is there some partnership we can do with that cash? Do can we consider inorganic growth? So I think all those things are things that are on the on on the radar. But, again, I think it's fair to say that to take a good short term and long term decision, we'll finalize the onboarding with the boards. We'll finalize the alignment, etcetera.

Speaker 1

And, yes, when we're gonna have some decision taken, we'll share that with with the shareholders and with the streets.

Operator

Super. Well, this concludes our presentation for today. I invite you to contact us with any follow-up questions at the address shown on screen.

Speaker 1

Last word. Elizabeth, thanks all the shareholder for everything. So bright days are ahead. Thanks.

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