Moving iMage Technologies, Inc.

Greetings. Welcome to the Moving Image Technology second quarter fiscal 2022 earnings result. At this time, all participants are in a listen-only mode. A question and answer session will follow the forum presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, Brian Siegel. You may begin.

Good morning and welcome to Moving Image Technology second quarter fiscal year 2022 earnings conference call and webcast. With me today is Chairman and CEO Phil Raffinson, CFO Mike Sherman, and Executive VP of Sales and Marketing Joe Delgado. Today's call will begin with prepared remarks and follow with a virtual Q&A session. Please submit your questions to the webcast portal and we will do our best to answer them. Please note this event is being recorded. 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 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. Future 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 provide to be accurate. Now I'd like to turn the call over to Phil. Phil, take it away.

Thank you, Brian, and thank you all for joining us today. Welcome to our second earning call as a public company. I'm Phil Rafson. CEO, Moving Image Technologies, or MIT for short. Similar to last quarter, today I'm going to spend my part providing an update on overall industry trends that we believe will drive the tremendous growth opportunity for 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 even more attractive investment opportunity than we were last quarter. Then I will turn over the call to our CFO, Mike Sherman, to discuss the results in more detail, followed by a 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, where there are approximately 40,000 screens, 18,000 of which are outside the top five circuits. While we do business with 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 box office receipts declining from over $11 billion in 2019 to 2.1 billion in 2020. In the second half of 2021, the industry began to recover. with 11 films grossing over $100 million in the domestic box office, and three more 2021 releases achieving this milestone in early 2022. Industry analysts expect these numbers to increase to over $10 billion in 2022, with potential tentpole examples including sequels to Avatar, Thor, Doctor Strangelove, Black Panther, Jurassic World, Aquaman, Top Gun, Sonic, Minions, and Spider-Man Universe animated movie. New movies include Batman, The Flash, Black Adam, and Lightyear, among others. We believe this strong industry backdrop will be boosted by several other growth drivers. The first is related to government grants. As part of the CARES Act, non-publicly traded live event operators can access over $16 billion in grants through the SBA. This program, called the Shuttered Venue Operations Grant, or SVOG, to date has provided over $14 billion in grants, with over $2.5 billion going to cinema operators. This money is just beginning to be spent on CapEx. And we are in the early stages of reaping the benefits of this spending. It's kicking off a multi-year growth cycle. Next, theater operators are using these funds to proactively refurbish, upgrade, and build out new modern theaters in order to significantly enhance the overall movie-going experience. This includes adding amenities such as in-house bars and lounges, breweries, restaurants, and in-cinema dining, among others. In fact, dine-in cinemas are among the fastest-growing part of the industry, and we are very well positioned with circuits such as Alamo Drafthouse, which just announced four new sites for expansion, Star Cinema Grill, and Flix Brewhouse, to name just a few. Finally, we are in the early stages of technology upgrade cycles. especially for laser projectors and servers. During the past upgrade cycle, we participated in 17,000 cinema screens over nearly five years. So we are at the very beginning of this cycle with a long runway ahead. So how does MIT fit in? MIT is a technology and hardware designer and manufacturer, an integrator and distributor of third-party technologies, and a project manager for theater industry. We have strong, long-standing relationships with suppliers, key technology providers, and customers, as well as architects and technical personnel, which help design in our products. Over 70% of our revenue comes from small and mid-sized cinema operators, which tend to be expanding more quickly than the big three, with whom we also work. From a prestige perspective, We also have installed over 40 in-home screening rooms for industry VIPs, which include senior industry executives, producers, and directors. There are four pillars to our growth strategy. The first is to shift our product mix towards higher margin proprietary products. Today, we have nearly 50 proprietary manufactured products that help increase and project margins and overall margins when sold a la carte. Beyond those, we have our Caddy line of cup holders and trays backed by over 20 patents. Caddy has leadership positions in cinema and professional sports auditoriums and arenas. Next, we have a set of technology products in development with disruptive potential. One is our multi-language translation device, which will also have a recurring revenue service. This disruptive offering offers multi-language in-theater captioning capabilities, including 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 the ADA requirements as well, so it also opens up the opportunity for theaters to engage with customers in those markets. Next, we have a bundled solution for venue management called CineQC. This includes a recurring revenue SaaS 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. We believe there is nothing like it available in the industry. The second pillar of our growth strategy is leveraging our caddy product line, strong position in markets beyond cinema, including stadiums and arenas. We will continue to build out this product line with the new and innovative features and will likely introduce a new potentially disruptive new digital product and service during calendar 2022. Medium to longer term, we also believe CADI can help provide an opportunity for our CineQC platform, which can be modified for these venues as well. Our third pillar looks to markets beyond North America over the next 24 months. beginning with Europe. We believe CineQC and the translator will be viable in international markets. For example, if the movie was not originally made in a local language instead of voiceovers, the original language film could be shown and translated into any local language. And fourth, we are targeting a creative M&A. These 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 products and services with recurring revenue streams. This will likely focus on SaaS 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. In conclusion, we are still in the early days of our growth opportunity and have numerous secular trail winds at our backs that are just beginning to turn into higher levels of revenue. We also have several potentially disruptive technologies that are in development and will bring recurring revenues while driving higher margins over time. Based on the former, We increased our guidance this morning from $12 to $15 million to $14 to $16 million. We believe these numbers may still prove conservative, and we will update guidance again on our next call. Before I turn over the call 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 as a company. from an operational, financial, product, and competitive perspective. And for our existing and future shareholders, I feel your pain as the company's largest shareholder. I know the past few months have been painful as the micro-cap market has been decimated by a number of macro concerns. But as our stock has gone down, our business has strengthened. and I'm excited about our strong growth prospects over the next several years. That's it for now. Mike, take it away.