Q1 2024 Moving iMage Technologies Inc Earnings Call
Greetings and welcome welcome to the moving image technologies first quarter 2024 earnings Conference call.
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It is now my pleasure to introduce your host Brian Siegel Senior managing director. Thank you Sir you may begin.
Thank you operator, good morning, and welcome to moving image Technologies earnings Conference call and webcast with me today is chairman and CEO. So Rasmussen, who will provide an industry overview cofounder executive VP of sales and marketing, Joe Delgado, who will provide a strategy and business overview and our CFO Bill great for those of you that have not seen.
<unk> release it is available on the investors section of our websites before beginning I would like to remind everyone that except for historical information. The matters discussed in this presentation are forward looking statements that involve several risks and uncertainties words like believe expect anticipate mean that these are our best estimates as of this frightening, but that there can be no assurance.
Is that expected or anticipated results or events will actually take place actual future results could differ materially from those statements further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the SEC.
Now I'd like to turn the call over to Phil and get away.
Thank you, Brian and thank you all for joining us today.
I'm, Phil Robson CEO of moving image technology or as.
If you look at it as an investment industry and company specific factors will contribute to our future performance.
First I'll address the cinema industry as it stands today and then Joe will discuss why we are so excited about the future, where we are introducing potentially disruptive technologies into cinema.
Sports stadiums arenas and other live entertainment venues.
<unk>, our business has been cyclical driven by new technology and technology upgrade cycles. Yes. Currently in early days of one right now where newer technologies such as laser projectors with upgraded servers, new screens and smart sound systems are being purchased to replace older technologies.
Additionally, we're seeing cinema owners build new theaters and upgrade and refurbish older ones.
New theaters often include new amenities, such as dine in bars and more all with the idea of making going to the movies a destination experience from an industry growth standpoint, as I've discussed previously on these calls probably took its toll on the industry over the past two years, we have returned to a more.
More normalized environment, but at the box office originally expected to approach pre pandemic levels. This year. Unfortunately, the Hollywood strikes and negatively impacted the box office over the near term, but theater owners are pivoting to new movie content, whether it be sports esports are cancers too.
Offset some of the lost revenue and example is AMC partnering with Taylor Swift to show her cancers in the theaters.
<unk> content helps it doesn't fully make up for the lost box office and concessions revenue during the holiday season for our customers. Additionally, now that the actual strike is over we expect studios to move ahead aggressively with marketing releasing new movies before returning the call over to Joe I'd like to thank all.
Our dedicated employees without them, we would not be in what I believe is the strongest position we've ever been as a company from an operational financial product and competitive perspective.
Thank you Joe.
Thank you Phil and good morning, everyone.
I'll start by briefly reviewing our business and providing updates on each area. Today cinema is our core legacy business, which consists of <unk> projects and selling our proprietary U S manufactured goods and third party technologies as Bill mentioned this is part of our business has historically been more cyclical and lumpy.
Project start dates often being pushed out. Additionally, EF any projects tend to be at the low end of our gross margin profile. Although there is a strong operating leverage in this part of our business today, if any remains the largest part of our business. However, given the lower margin profile Lumpiness and timing factors I just mentioned a major.
Part of our strategy going forward is to shift our mix towards higher margin products as well as smooth out the lumpiness and cyclicality for cinema. This includes expanding our existing lineup over 50 proprietary manufactured products, including our Ada compliance products and <unk>, the former of which was a contributor to our strong first quarter results.
By manufacturing these products, we can significantly increase our margins on <unk> projects and our overall company gross margin when sold Ala Carte. Additionally, our partnership with <unk> professional for Smart power amplifiers is another potential source of growth and margin expansion for both <unk> and <unk> projects and all the card sales.
After the end of the quarter, we announced our first two orders for these products and we currently have several large circuits in cash we're confident in this relationship because each screen need five to six power amplifiers on average and.
So confident in its product quality, it's warranty is two times the industry standard between the quality at <unk>.
In supply chain and quality issues at their competitors, which are also deemphasizing the cinema market I feel optimistic about sales continuing to ramp in fiscal year 'twenty four.
So what's next for cinema, where truly excites me is that we are in the latter stages of going to market with a set of potentially disruptive high margin technology offerings that will also bring reoccurring services revenue first I'll discuss rmi translator.
Translator is a multi language technology solution with a reoccurring revenue stream that forms the high end of our accessibility strategy. The market in North America alone is tremendous with over 70 million non English proficient speakers, who may not have previously attended movies with this product and service those who did attend previously.
Now have a significantly enhanced movie going experience. This is a new product class for the industry and adoption has yet to occur that said I believe there are now catalysts that play into adopting my translator solution. The North American theater owners organization known as NATO within the industry established the cinema Foundation and <unk>.
All industry nonprofit charged with promoting and expanding the industry and the overall moviegoing experience our own Frank T serves on its board of directors and one of the foundations top marketing priorities is to expand outreach and bring more Eva non English proficient patrons to the movies. These initiatives fall right into the wheelhouse of my translator.
And there was tremendous enthusiasm and interest in the product that semicon and subsequent Tradeshows. We believe that this industry effort bodes well for the success of that my translator and we will keep you appraised as things develop.
<unk>, our SaaS based quality control platform is another example, we've been working with National Amusements, a large international movie circuit on upgrading and improving this product while we've made significant progress there's still work to do and we're evaluating options to get those to the finish line. Unfortunately, the additional development has also delayed our plans to rollout.
Product more broadly however, once complete we will have a much more robust tested and scalable offering to bring to other circuits.
The next opportunity for us is to move beyond sentiment here, we're targeting two areas. Other live entertainment venues and E Sports I believe esports has the potential to be a significant incremental growth driver for us. This year in May we did an investor presentation, which is available on our IR website with rig.
Star founder of our esports partner sandbox he laid out his vision for creating the little league of esports by setting up local amateur leagues and movie theaters hosted on the big screen not only is this a very attractive activity for parents and kids, but for theater owners themselves with a sandbox League theater can fill excess capacity of.
Over 6000 empty seats per year and get a return on his investment in as little as eight months that is compelling return in general, but especially to theater owners, who are used to getting an ROI of 18 to 24 months. Rick then went on to say he already had an active pipeline in North America of over 2500 locations and another 500.
Nationally and our relationship with these same customers confirm these numbers right now sandbox is out doing a funding round, which will enable him to start to ramp up locations more quickly. So please stay tuned finally the growth opportunity I'm. Most excited about is what we currently call E. <unk>, we have infused.
Our caddy product line of Cup holders with technology, and we will develop applications and services for use in stadiums and arenas. We introduced the <unk> concept to executives at three major League baseball stadiums over the past three months, we got great feedback on the type of applications that would excite them and identified other potential partners as well this month will perform.
Actual market research with a four stadium executive which will allow us to further solidify the picture for the apps and services that drive demand for this product. The Tam here is huge with millions of existing seats, becoming retrofit candidates. In addition to new stadium and arena builds the potential here on its own is tremendous but <unk>.
Combination with esports I might translator in <unk>, it can reshape our business and financial models in future. We will keep you appraised as well as these hit milestones.
As I mentioned on our previous call, we've accelerated our strategy to expand outside North America, we have established relationships overseas before the pandemic and have been reconnecting over the past few quarters the opportunity here encompass from any products that we believe can smoothly transition to the international markets, including our new in development product lines. Additionally, the.
Cinema market in Europe is just starting to recover from the pandemic roughly two years. After we did so the timing for us to explore these opportunities couldnt be better initially we see the opportunity for early a smart power amplifiers and have already received request for quotes from cinemas in the UK and Germany. We also see the opportunity for my translator in Sydney QC to move to international markets in the year.
Orders to come in sandbox already has a pipeline established outside North America.
Finally, we have an active corporate development program that includes a business development deals, we made with sandbox and <unk> acquisitions, such as the <unk> product line and other ongoing activities in conclusion, we're still in the early innings of our growth opportunity for our emerging technologies, while our legacy business continues to improve.
With that I, Thank you and I'll turn it over to Bryan Bryan.
Thanks, Joe and thank you everyone for attending our earnings call I'm going to spend a little time with you with your model and then I'll take you through the quarter followed by Q&A.
To date, our legacy assess any projects have been the key driver for our business, making up roughly 60% to 65% of revenue as Joe and Phil mentioned assessing these projects are more cyclical and can often see start dates pushed out as we saw that slide 23, We service a project manager procuring and reselling adversity and services for refurbishing.
Upgrading and building in theaters because a large part of these projects is about pass through costs with a small margin edited project margins around the mid teens, we have several routes to improve these margins, including Upselling installation services scoping, our proprietary manufactured products into the project. So the resale of higher margin technology products.
Leading projectors in servers and more recently sound system products through our relationship with a professional <unk>.
Next we sell our higher margin proprietary manufactured offerings, Alex Hearts, which have margins ranging from 35% to 55% and include our fabrication chat you're at 88 compliance products. Additionally, since we own the early days of a multiyear technology upgrade cycle, we received discrete orders for servers and projectors.
Power apps, all of which have gross margins above the company average in the near future as our emerging products and my translator semi QC and he has hit the market and start to scale, we expect our mix to shift even more significantly away from Anthony as these products will likely have 50% plus gross margins.
Now moving to our first quarter results, we reported revenue of $6 6 million up 13% versus last year gross profit increased 17% to $1 8 million gross margin was up 80 basis points to 27, 4% in the quarter, resulting from the favorable product mix GAAP operating expenses were $1 4 million.
Down 5% versus last year, mainly due to lower corporate governance costs.
Operating income was 0.4 million versus an operating loss of 0.1 million last year.
GAAP net income and EPS were <unk> 4 million and <unk> per share versus a loss of 0.1 million <unk> <unk> per share last year.
non-GAAP net income and EPS were <unk> 4 million and for <unk>.
<unk> to net income of $1 million one per share last year.
Moving to the balance sheets are cash and cash equivalents were $6 4 million at the end of the first quarter down.
200, thousands from the fourth quarter, mainly reflecting changes in working capital.
Now I'll provide an update on our fiscal year 'twenty outlook.
Writers and actors strikes have impacted our customers by driving the uncertainty into their budgeting process. As a result, we're providing our fiscal year 'twenty four outlook last month on our Q4 2003 earnings call. We built in some conservatism into our commentary by only focusing on our legacy business.
As I said at the time, we expect to see low double digit topline growth, while paring losses and approaching breakeven the views this quarter remain the same.
This guidance took into account the impact of the active strikes on our second quarter results, which when combined with traditional seasonal weakness, we expect to be materially down versus last year, but then we will see a stronger second half next I provided upside opportunities that were excluded from our forecast I will now update these items there's 88.
Refresh a top five cinema circuits that would begin in the second half of fiscal 2024.
We recently held conversations with his circuits and feel we are well positioned to get this multimillion dollar order for esports last quarter I said that our guidance included flat sales of our movie sports systems through FY 'twenty, three which was roughly 15 to 20 systems I apologize, but I misspoke.
Slide 23, we only recognize revenue for eight systems have received orders for 16 systems. Therefore anything over eight systems sold in fiscal year 'twenty four would be upside to our guidance. Additionally, what sandbox closes its funding round, we expect them to quickly move to rollout leaks at the circus that order the ate systems that were not sure.
In fiscal year, 'twenty, three and then start to ramp additional locations.
As I discussed in our recent investor presentations are incremental opportunity for Sallie Mae Smart power amplifiers is very significant still we included $0 for sales of these products in our FY 'twenty guidance, so any orders, including the two orders we announced in the second quarter would be upside.
A total market of about $630 million in North America, and about 5% to 10% annual attrition rates.
Based on market is 32% to $63 million annually. So hypothetically speaking capturing just 10% of this could add $3 million to $6 million in annual revenue, which is a materials considering we only reported $20 million in fiscal 'twenty three.
And this doesn't even take into consideration new projects or international sales when.
So let me just say that you see and we continue to work closely with national amusements to enhance the system. Once this happens we expect they will start to rollouts in the QC to their 500 international locations, which were not included in our guidance. We will also then start to market this product to other cinemas and fill the pipeline.
Finally, any sales of BMI translator or any international sales would also be upside.
Regarding catalysts, you should be looking for announcements on the key initiatives mentioned during this call and the upside opportunities I mentioned just now.
We plan to provide milestone updates for our emerging products and announce whatever orders we can through press releases and earnings calls. This year also of note we put in place a <unk> one trading program for our share repurchase program. This went into effect in November 1st it allows us to be in the market every trading day, regardless of whether we are in a blackout period.
Overall I continue to believe we've never been in a stronger position within cinema. We're excited that our new initiatives are moving forward. We've prudently want to ensure that we have the right offerings and that they are ready for prime time before we start marketing more aggressively.
Just to let everybody know, Joe and I will be at the Sidoti Microcap Conference. This week. So please tune into the webcast at $3 15 PM Eastern time on Wednesday. The link is available on our website if you're interested in a one on one meeting please reach out to me or request went through the Sidoti corridor I want to thank everyone for attending today's call and look forward to speaking with you.
Our next call in mid February.
Thank you.
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One moment, please while we poll for questions.
Thank you. Our first question comes from the line of Neil Fagans, a private Investor. Please proceed with your question.
Hey, guys.
First of all it's great to see the the nice performance of the core business.
And you covered a lot of ground on the four or five.
Early stage, new initiatives and I wanted to see if I could.
Just drill down a little bit more on a couple of them.
But for the benefit of me and I think others.
Could you review, what our contractual relationship terms are with sandbox.
In terms of what the two or three.
Primary elements of that agreement are and what our equity ownership interest in them is right now based on their current capital structure.
Oh.
Yeah, Hey, Joe.
With respect to sandbox.
The equity position.
And then Brian can probably share a little bit more about this in detail.
But I think we assume something like 6%.
Of equity.
And it depends on where we're going to land with respect to their first round of funding.
And what we did a site.
Supplying the technology, we have we have that exclusive or exclusive.
Our supplier agreement in place and I believe that is a three year exclusive supplier agreement.
And that's for the E. Caddie and is is the is the revenue per.
To us still around 43000.
Yeah. So.
Yeah. So.
Sure.
Yeah, and it's a it's a multimillion dollar.
Exclusive supply agreement Ah, there's technology sharing and ownership as part of that.
And yeah, generally we're talking 40 to $50000 per system.
Yeah, Okay and.
Are you all still and Joe are you guys considering.
Taking a piece of this current round I believe you have a first right of refusal on all of their future financings, if I'm not mistaken.
Yeah, you broke up at the beginning of that question Neil I'm, sorry, I wish I was that I was asking if you're planning to participate in this next financing round.
Yeah, well, we're not going to comment on that that's the round is still ongoing and yes, that's not something we're going to comment on at this point.
Okay, Let me ask another quick one here.
Is there any visibility on potentially landing any large sports arenas, either new builds or refresh.
You know where that really hasn't been part of the conversation.
Since I became interested in the company, but is there any visibility probably more likely on some of the large stadiums.
Refreshing our needing sizable.
The dollar amounts of your caddy product lines.
Yes. Since this is a brand new technology nothing like this really exists.
Yeah, I'm not I'm not talking about <unk> I'm, not talking about <unk> I'm talking about.
The caddy line as it exists today.
Yes, there is.
Existing we're looking at existing.
Pipeline.
Now for sure we worked closely with the major ceding companies.
Neil.
By coffee.
Out of Maine, and Irwin seeing out of.
Michigan.
So yes. There is there is new builds and Remodels going on you know arena stadiums now.
However that has lagged I think we've mentioned in prior calls that has definitely lag behind you know like our core business cinema, but it is now starting to pick up.
Okay, and Joe would you would you say the likelihood of landing one or more of those opportunities is likely in 2024 or is there just not good enough visibility to go that just to say that yet.
I think we've got we've got a couple of really good candidates they should land this fiscal.
Okay.
Okay, well, that's great and listen one more quick one how should we be thinking about E. Caddie. The next generation of the caddy. The caddy product should we be thinking more likely revenue generation in 2025.
Or.
Are you thinking that it's still possible that we could start to have that product formalized finalized and ready to go to market and generating sales later this year.
Well, what I'll say about that Neal is the excitement level for us here at the company is tremendous because of the feedback that we've got and I think we're going to be very very judicious.
With respect to our approach to market, we're going to.
Getting our ducks in a row and basically it's all about voice of the customer right.
We're getting into a space.
That has never existed so we want to make sure that we come into the market with a product and service.
Yes.
Both robust and flexible enough to meet the customers' needs at the arena and stadium level, the operational level and of course from a revenue standpoint, its got to bring value to both sides right us.
And arena and stadium, operator, I think we're well on our way to doing that.
Okay, and I guess I'm.
I'm just.
Sorry, just to build on that I would probably be looking to 2020 for fiscal 2024, its a development year.
We're still talking to you know some stadiums this month.
And from that we'll be able to go out and start to develop.
The the roadmap and the actual.
Service that will be provided.
So you know I, probably wouldn't look to any business this year and if if it does come some business that.
That would be again, another category of upside, but you know I would I would look at it sometime next year and beyond.
Okay, well listen I'm I'll I'll yield the floor here and.
Just would like to reiterate the great great great looking core numbers.
And you know you guys are basically trading only $15 20.
<unk> cash and you're profitable so hopefully inactive IR program to get out and increased visibility, but thanks, again and I'll yield the floor.
Thank you Neal Thanks Neal.
Thank you, ladies and gentlemen that does that does conclude our question and answer session and with that the conclusion of today's call.
Disconnect your lines at this time, thank you for your participation and have a wonderful day.
Thanks, everybody.