Moving iMage Technologies, Inc. (AMEX:MITQ) Q4 2023 Earnings Call Transcript September 26, 2023
Operator: Greetings. Welcome to Moving iMage Technologies’ Fourth Quarter and Year End Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Brian Siegel, Senior Managing Director. Thank you. You may begin.
Brian Siegel: Thank you, operator. Good morning and welcome to Moving iMage Technologies’ earnings conference call and webcast. With me today is Chairman and CEO, Phil Rafnson, who will provide an industry overview; Co-Founder and Executive VP of Sales and Marketing, Joe Delgado, who will provide a strategy and business overview; and our CFO, Bill Greene. For those of you that have not seen today’s release, it is available in the Investors section of our website. 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, anticipates mean that these are our best estimates as of this writing, but that there can be no assurances 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. Take it away.
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Phil Rafnson: Thank you, Brian and thank you all for joining us today. I’m Phil Rafnson, CEO of Moving iMage Technologies, or MiT. As you look at MiT as an investment, industry and company-specific factors will contribute to our future performance. First, I’ll address the cinema industry tailwinds and then Joe will discuss why we’re so excited about the future, where we are introducing potentially disruptive technology into cinema, eSports, stadiums, arenas, and other live entertainment venues. Historically, our business has been cyclical, driven by new technology and technology upgrade cycles. We are currently in the early days of one right now, where the cinema owners are starting to upgrade their technology is coming to the end of its useful life with newer technologies such as laser, projectors, with upgraded servers, new screens, and sound systems being purchased to replace these.
Additionally, we are seeing cinema owners build new theaters and upgrade or refurbished older ones. These 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, COVID took its toll on the industry. Over the past two years, we have returned to a more normalized environment, with the box office originally expected to approach pre-pandemic levels this year. Unfortunately, the Hollywood strike will cap the upside here this year, but we are seeing an expansion of another trend by theater owners to bring in business, showing non-movie content, whether it’s sports, eSports, or concerts.
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Q&A Session
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An example is AMC partnering with Taylor Swift to show her concerts in theaters. Before returning the call over to Joe, 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 perspective. Thank you. Joe?
Joe Delgado: 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 consisting of FF&E projects and selling our proprietary US manufactured goods and third-party technologies. As Phil mentioned, this part of our business has historically been more cyclical and lumpy with project start dates often being pushed out. Additionally, FF&E projects tend to be at the low end of our gross margin profile. Although there’s a strong operating leverage in this part of the business, today, FF&E remains the largest part of our business. However, given the low 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 smoothing out the lumpiness and cyclicality of that business.
For cinema, this includes expanding our existing lineup of over 50 proprietary manufactured products, including our ADA products and Caddy lines. By manufacturing these products, we can significantly increase our margins on FF&E projects as well as our overall company gross margin when we sell these products à la carte. Additionally, our partnerships with LEA Professional for Smart Power Amplifiers is another potential source of growth and margin expansion for the FF&E projects and those à la carte sales. Each theater needs five or six or even more of these power amplifiers per cinema screen and with LEA’s warranties being twice that of the industry average that demonstrates the confidence we have in their overall quality. Currently, we have several large circuits testing these products and between the quality at LEA and the supply chain issues that some of our competitors are experiencing, I wouldn’t be surprised to see sales start to ramp in fiscal 2024.
Next up for cinema, and this is what truly excites me about our future. We’re in the latter stages of going to market with a set of potentially disruptive high-margin technology offerings that will also bring reoccurring service revenue. First, I’ll discuss our MiTranslator offering, which I believe has the potential to begin attributing to growth in fiscal 2024. The MiTranslator is a multi-language technology solution with a reoccurring revenue stream that forms a high end of our accessibility strategy. The market in North America alone is tremendous with over 70 million non-English proficient speakers that may not have a previously attended to movies. With this product and service, those who did attend previously can now have a significantly enhanced moviegoing 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 the MiTranslator solution. The North American Theatre Owners organization known as NATO within the industry established the cinema foundation and all industry non-profit charge with promoting and expanding the industry and the overall moviegoing experience. Our own Frank Tees serves on its Board of Directors. One of the foundation’s top marketing priorities is to expand outreach and bring more ADA and non-English proficient patrons to the movies. These initiatives fall right into the wheelhouse of MiTranslator and there was a tremendous enthusiasm and interest in the product at CinemaCon and subsequent trade shows.
