Moving iMage Technologies, Inc.

Good day and welcome to the Moving Image Technologies first quarter fiscal 2022 earnings call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. You will be taking questions through the webcast portal. Please note this event is being recorded. I would now like to turn the conference over to Brian Siegel, Managing Director at Hayden IR. Please go ahead.

Thank you, Joe. Good afternoon, everyone, and welcome to the Moving Image Technologies first quarter fiscal year 2022 earnings conference call and webcast. With me today is Chairman and CEO Phil Rafson, CFO Mike Sherman, and Executive VP in Sales and Marketing Joe Delgado. Today's call will begin with prepared marks and follow with a virtual Q&A session. Please submit your questions through the webcast portal, and we will do our best to answer them. This earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date of the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Featured developments and actual results could differ materially from those set forth in contemplated by or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Please view the NQ filing with the SEC this afternoon, or sorry, tomorrow morning, to get further information about risks and uncertainties. Now I'd like to turn the call over to Phil.

Phil? Thank you, Brian, and thank you all for joining us today. Welcome to our first earnings call as a public company. I'm Phil Rafson, CEO of Moving Image Technologies, and or MIT for short. As a newly public company, today I'm going to spend my part of the call discussing the overall industry trends that we believe will set the base for our outlier-type growth at MIT over the next few years, followed by an overview of MIT's business and growth strategy. And I'll finish with a summary of why I think we are a very attractive investment opportunity. Then I will turn the call over to our CFO, Mike Sherman, to discuss the results in more detail, followed by Q&A. MIT serves the commercial cinema and live events industry in several ways. Today, the vast majority of our business is serving cinema owners and operators. In North America, there are approximately 40,000 screens, 18,000 of which are outside the top five circuits. While we do work with all of the majors, the majority of our business is with small to medium-sized operators. As you probably know, the industry has been hit hard by COVID during 2020 and the first half of 2021, with the box office receipts declining from over $11 billion in 2019 to $2.1 billion in 2020. In 2021, we are seeing a tale of two halves. At this point, Over 90% of the cinemas in the U.S. are open, and we are not only seeing a return to movie theaters by consumers, but we are seeing studios committing to theater exclusivity after various attempts on their part and a controversy surrounding the simultaneous streaming and theatrical releases of movies such as Black Widow. Additionally, as the recent releases have shown, there is a pent-up demand for blockbuster cinemas with movies like Venom 2, Shang-Chi, which had theatrical releases only, and several other movies eclipsing $100 million at the domestic box office and numerous potential blockbusters due to be released before the end of the year. This strength has been confirmed recently by numerous large theater chains and their earnings reports, including AMC, Regal, Cinemark, and IMAX, to name a few. Just this trend alone would make me very bullish on the industry and our prospects moving forward. However, there are several other major drivers on top of this, just market recovery. The first is related to government grants. Part of the CARE Act, non-publicly traded live event operators can access over $16 billion in grants through the SBA. This program called the Shuttered Venue Operators Grant or SVOG to date has provided over 10 billion in grants during the first round and over 2 billion going to cinema operators. The second round has recently started as well. These grants can be used for anything from theater operations to payroll to upgrading or building new cinemas. And this money will need to be spent within the next two years. So this is a second major boost to the industry. The third boost is the industry is well aware of competition from other entertainment sources and theater operators are proactively refurbishing, upgrading, and building out new modern theaters in order to significantly enhance the overall movie-going experience. This includes adding amenities such as house bars, lounges, breweries, restaurants, and in-cinema dining, among others. In fact, dine-in cinemas are amongst the fastest growing part of the industry. And we are well positioned with circuits such as Alamo Drafthouse, Star Cinnamon Grill, Flix Brewhouse, just to name a few. And finally, we are in the early stages of technology upgrade cycle, especially for laser projectors and servers. During the last upgrade cycle, we at MIT participated in 17,000 cinema screens. So we believe not only are we at the very beginning of this cycle, but that there is a long runway ahead. We are also seeing some of the premium theaters begin to install the next generation of screen technology, which is direct view LED. And we have installed the only two to date in the United States. These screens require no projector. They last three times longer as digital projectors today and have an immeasurable increase in picture and sound quality. While pricing is currently prohibitive for the mass market, this is a wave of the future, and we are well positioned with two of the three manufacturers being Samsung and Sony to serve early adapters. So how does this impact us? MIT is a technology and hardware design and manufacturer, an integrator and distributor of third-party technologies, and a project manager to theater industry. We have longstanding relationships with suppliers, key technology providers and customers, as well as architects and technical personnel, which will help design in our products. Today, we have over 45 proprietary products, a higher margin line, which which has a higher margin line, which we are expanding on. Well, the big three circuits are all customers. We get over 70% of our revenue from small to mid-sized cinema operators, which tend to be expanding more quickly. From a prestige perspective, we have also installed over 40 in-home screening rooms for industry VIPs, which include senior executives, industry executives, producers, directors, and actors. There are four pillars to our growth strategy. First is to shift our product, as we mentioned, to mix towards higher margin proprietary products. We plan to develop, introduce, or support disruptive technologies, add recurring revenue sources, including software as a service, also called SaaS, and subscriptions. I already spoke to the direct view LED opportunity. Beyond that, we're about to start field trials for our translation device and service. This disruptive offering brings multi-language in-theater captioning capabilities, including the American Sign Language through augmented reality glasses. The market here in North America alone is tremendous, with over 70 million non-English proficient speakers that may not have attended movies previously, or for those that did, they could now have a significantly enhanced movie viewing experience. This product meets all ADA requirements as well, so it is open to the opportunity for theaters to engage with consumers in those markets. Finally, we believe this product is internationally viable, For example, if the movies are not originally made in the local language, instead of voiceovers, the original language film could be shown and translated into any local language using this technique. We also have a bundled solution for venue management called CineQC. This includes a recurring SA SAS, a platform hardware and services and includes applications such as quality assurance, theater operations, staff management, inventory control, back office analytics, and remote access and control over auditorium systems. Similar to our translation offerings, we believe this product is viable on an international basis. The second pillar is leveraging our caddy product line, which we acquired in 2019. Caddy designs and sells cup holders and other seating-based products as well as lighting systems. Caddy also has over 20 current patents. They are the market leader in cinema, stadiums, arenas. For example, their customers include over 80% of the Major League Baseball, hockey, NBA, and NFL stadiums. The opportunity includes not only retrofitting millions of seats, but we have some interesting new digital technology in development that we think can also disrupt the industry and materially expand Caddy's addressable market. Finally, we believe Caddy will enable us to expand into stadiums and arenas to sell our proprietary items. For example, we believe our CineQC software can transition with minimal investment and can address a significant gap in stadium operations and management. Our third pillar is international expansion. Over the next 12 to 24 months, we plan on targeting Europe, and long term, we see the potential of Asia and South America. Part of this is renewing the relationships that we have built over before COVID, and the other is being able to offer our internationally viable products with the translator solution, and CineQC. And fourth, we are targeting M&A. There are three main areas we are focused on. The first is consolidating industry technology equipment providers and broadening our offerings. The second is acquiring strategic projects, products, and services with recurring revenue streams. This will likely focus on SAS, or other subscription type offerings that will enhance our portfolio and provide higher value to our customers. And finally, we will look at companies that could enhance or add to our customer relationships. Now I'd like to summarize my remarks with the following key points so that as I am extremely optimistic that our fiscal 2021 was a tough year and we can bounce back with significant growth in fiscal 2022 and beyond. First, industry trends are favorable. During 2022, industry analysts are forecasting domestic box office sales to return to 2019 levels and growth in the following years. When combined with billions of dollars in industry grants, a technology replacement cycle, pent up demand for refurbishment and upgrades and new theater construction, the industry has significant trail wins at its back. Second, we are extremely well positioned to take advantage of these trail wins through our relationships with both growing and small and mid-sized cinema circuits as well as the top three circuits. Third, we have a strong and growing proprietary product offering complemented by industry-leading partnerships and distribution of third-party technologies. And fourth, we believe we have multiple organic and inorganic growth opportunities in disruptive new technologies, international expansion, and moving into adjacent live performance venues such as stadiums and arenas. As you can see, we have a lot of opportunities, both market-driven and MIT-specific. for us to capitalize on, and I believe we are in a position to do so. Before I turn the call over to Mike, I'd like to thank our dedicated employees. Without them, we would not be in what I believe is the strongest position we've ever been in as a company from an operational, financial, product, and competitive perspectives. And I'm excited about our strong growth prospects. And so thank you all, and Mike, take it away.