Cineverse Corp (CNVS) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2006 Access Integrated Technology's earnings conference call. My name is Minosha and I will be your coordinator for today.

[OPERATOR INSTRUCTIONS]

As a reminder, this conference is being recorded for replay purposes.

Listed as a caution, some of the materials discussed, today, may include forward-looking statements regarded AccessIT's business and expected financial results. Words like "anticipate", "believe", "estimate", or "expect" are generally forward-looking statements. Although the company believes that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available and certain assumptions. There are no assurances that they will prove correct. You should not rely on anything in these forward-looking statements as a promise or representation as to future results. You are encouraged to read the company's Securities and Exchange Commission filings.

I would now like to turn the call over to your host for today, Mr. Bud Mayo, Chairman and CEO. Please proceed, sir.

Thank you, operator. Good morning, everyone, and thanks for joining us, today, for AccessIT's fourth quarter and fiscal year 2006 investor conference call. With me on today's call are Brian Pflug, Senior VP of Accounting and Finance, and Jeff Butkovsky, our CTO.

Let me start by saying that fiscal 2006 was a groundbreaking year for both the company and the industry. And looking back at the many achievements of the past year, needless to say, we're very pleased with our accomplishments. Digital cinema is now a reality. The systems are being deployed in increasing numbers across the country and Hollywood studios are delivering an ever-creasing stream of digital features, and in many cases, already allowing exhibitors to show digital content on every screen in their multiplexes, simultaneously, and moviegoers are finally able to experience the wonders of digital cinema - improved image and sound quality and more choices, including digital 3d and concerts.

Before I speak about this and other key digital cinema developments, let me first discuss AccessIT's financial results for the quarter and year, after which we'll take your questions.

Those of you who followed AccessIT's development over the past few years know we've made an investment in the business a top priority. As an industry pioneer, we've invested both early and heavily to ensure that the digital cinema, when the digital cinema finally arrived, we'd be there at the forefront. Today, with digital cinema a reality, it should be obvious to everyone that we are the clear leader and are beginning to see real benefits from those efforts and those investments with new products, including our global theatrical distribution system, our hardware agnostic command center software, and our first-of-its-kind anti-piracy detection service, we've greatly reinforced AccessIT's position as the only company capable of meeting the comprehensive digital needs of the motion picture industry, combining proven digital cinema technologies with extensive real-world experience.

Focusing on the top line revenue growth in the quarter and the full year, 28% and 58%, respectively, reflected both organic growth and revenue contributions of two acquisitions. Although it's still to early for major revenue contribution, the fourth quarter was the first time we recorded virtual print fees, data command center license fees, and content delivery revenue all in the same quarter. We expect these to ramp up, significantly, over the next [inaudible]. This is important as these three revenue sources will be the key drivers as we move through the months and years ahead.

SG&A expenses, the direct result of the investments I referenced, earlier, principally the addition of key personnel, the ongoing ramp up of our media services unit, and increased marketing activities - at least at the beginning - currently limit our bottom line. Also prominent in the quarter and year-end results are the increase in some of the non-cash items, specifically depreciation and amortization of our infrastructure assets essential to supporting our operations and service offerings. Also evident is the one-time, non-recurring debt conversion expense of $6,269,000 recorded in August related to the conversion of all of outstanding convertible debentures and exercise of all related common stock warrants.

Let me remind you that it's this infrastructure that has enabled the company to deliver its unique, end-to-end digital cinema solutions for both studios and exhibitors. We've actually also helped hardware vendors, such as Christie and others, to move forward. Real Dees, another beneficiary, producer of the technology for digital real 3d movies. These assets will have significantly positive impact on future operating results as revenue streams related to the growth of digital cinema accelerate.

At this point, I'd like to highlight just a few of the more notable events of the quarter and the year. First, digital cinema revolution has arrived. Digital cinema returned to the forefront of the industry with the release of "Star Wars", last summer. This was a watershed event and AccessIT was pleased to play a role in this milestone, presenting it to its audiences in 2K digital at our Pavilion Theater where we also hosted a media and investor event. This summer will even be more notable. This was evident, Memorial Day weekend, and for the first time, the number of digital titles currently in theaters enabled our Pavilion nine-plex and many of our exhibitor partners to show full digital lineups in their multiplexes. In fact, the total utilization of almost 85% of Christie/AIX screens was experienced, that weekend. Over the past two weekends, we've experienced similar utilization with more screens coming online, everyday. This past weekend, beginning June 9, offered another milestone as it was the first time digital features from all seven major studios were playing, simultaneously, on Christie/AIX-enabled screens.

On the heels of the formal technical standards published by Digital Cinema Initiatives, or DCI, AccessIT with its partner, Christie Digital Systems, unveiled its groundbreaking digital cinema rollout plan for 4,000 screens, nationwide. We've been successful in securing the support of virtually all the major studios, including Disney, Fox, Universal, DreamWorks, Sony, and most recently, Warner Brothers. We expect to add more studios, both large and small, in the coming months, ensuring that exhibitors will have an extensive and steady stream of digital content from which to choose when scheduling product for their customers.

Working closely with Disney, we were also the first in the industry to play a DCI-specified JPEG2000 format digital presentation, "Chronicles of Narnia: The Lion, The Witch, and The Wardrobe".

Exhibitor interest in our plan has been high, as we quickly signed up large and small exhibitors, alike, and we continue to do this. These exhibitors now include Carmike Cinemas, the nation's third-largest circuit for 2,300 screens, and we completed the conversion of UltraStar and Emagine circuits, the first chains in the world to convert 100% of their screens to digital. Installations at Carmike, Galaxy Theaters, and Cinetopia are now progressing, rapidly. As of March 31, 2006, we had completed the installation of 210 systems. As we ended May 2006, that number increased to 426 systems at 57 sites in 18 states. Our goal is to complete at least 500 screens by June 30 and increase installations to as much as 200 or more a month by September and to 300 or more a month by April 2007.

Second, key staff additions and new service offerings. Expanding our management team was another important focus of AccessIT in 2006. To help lead our digital cinema rollout, we were joined by Chuck Goldwater, former CEO of DCI, who now serves as President and Chief Operating Officer of our Christie/AIX unit. He brings to the company over 30 years of close relationships with our two key customer segments - the studios and exhibitors. [Fred Taro] joined the company as Director of Business Operations at AccessIT's Digital Cinema Technology and Services division, where he is leveraging his extensive exhibitor relations expertise with responsibility for managing the operational functions necessary to support successful deliveries of movies and other content to theaters. And in January of this year, we expanded our Board of Directors with the addition of Robert Mulhollond. Robert brings to AccessIT more than 25 years of capital markets and business experience aimed at such firms as Merrill Lynch, where he served as Senior Vice President and Executive Committee member.

To head off our global expansion efforts, we promoted Dave Gajda, SVP of International. Dave has been forging strong relationships in Europe, South America, Mexico, and throughout Asia, laying the foundation for what we feel will be a very exciting and important new business opportunity for the company as we seek to replicate our success, here, overseas.

In February, Ravi Patel, formerly the President of our Satellite Operations organization, accepted a position as Senior Vice President of Financial Planning at the corporate level. In this role, Ravi will assist in creating and evaluating international business plans, as well as vertical opportunities for AccessIT, here, in the United States.

Further expanding the breadth of services we can offer studios and content owners, AccessIT launched the industry's first forensic watermarking detection and recovery service. Forensic watermarking technology will play an important role in stemming the tide of global piracy, estimated to cost the motion picture industry a staggering $6 billion, last year.

Third, capital markets activities. To ensure [inaudible] on a sturdy financial footing, AccessIT completed a number of important transactions. These included the previously referenced convertible debenture conversion and the filing and subsequent draw down of $75 million of common stock through our shelf registration, bringing our equity to $100 million over the past year. To provide an adequate funding for future capital equipment outlays contemplated under its ongoing 4,000-screen digital cinema rollout, the company has secured a commitment for $217-million senior credit facility from GE Commercial Finance. We're still in the process of finalizing the definitive loan documentation in order to close the credit facility.

Together with AccessIT's equity investment, the company believes it will have substantially all of the necessary capital to fund this rollout. In an effort to broaden awareness and interest in the company, we've been active in meeting with investors and attending investment conferences across the country. We also recently listed from the NASDAQ national market. These efforts have already produced positive results, such as increased trading activities and new analyst sponsorship.

At this point, I'd like to turn the call over to Brian Pflug, who will comment on our latest financial results. After Brian's presentation, I'll discuss a few of the more recent developments in my concluding remarks and then open the call to questions. Brian?

Thanks, Bud. I'll begin by reviewing our results of operations for the quarter. Our revenues for our fourth quarter ended March 31, 2006 were $4.5 million, which is an increase of 28% from our 2005 fourth quarter. And on a year-to-date basis, the revenue growth was greater at 58%. We experienced significant year-over-year revenue increases across most of our operating units. Our Media Services segment's revenue grew by 63% versus the prior year's fourth quarter, including the box office and succession sales of the Pavilion Theater, which was acquired in February 2005. Our Data Center Services segment revenues grew by 1%, which was due to continued strong growth in our Managed Services business, including the addition of webhosting services, but offset by the expiration of certain Data Center customer contracts in our Legacy Data Center business. We will de-emphasize the Pure Data Center Rental business in favor of higher-end managed services and webhosting.

Across our revenues reflects our direct operating expenses, consisting mostly of personnel and facility-related costs and increased by 56% for the quarter over the prior year, predominantly in Media Services segment, most of which was attributable to film rent, concession expenses, payroll, and other operating costs of the Pavilion Theater and additional payroll-related costs within our Media Services businesses, in general.

We continue to add resources to our infrastructure, this year, as we augment our ability to service our digital cinema rollout and other increased activity. Our quarterly growth profit margin fell to 38% from 49% in the prior year's quarter due to these factors. The loss of high margin Data Center customers, as well as lower margins from the Pavilion Theater, and added costs associated with the startup of the digital movie delivery business. The Pavilion's cost structure, like other movie theaters, results in margins that are typically lower than that of our other businesses.

As Bud mentioned, our selling, general, and administrative expenses have also increased due to increased headcount and office expenses, which include the acquisitions of the Pavilion and AccessIT Satellite and the creation of Christie/AIX to support the digital cinema business. Our total company headcount has steadily increased, going from 93 to 140 employees in the year-over-year period, including the part-time employees at the Pavilion Theater. We also incurred higher professional fees as a result of increased compliance costs and due to the overall growth of the company and entering into new business transactions and general expenses related to our Media Services business.

We have continued to increase our SG&A, but we anticipate that the rate of increase in these costs will be less dramatic than it has in the past. As a result, both our EBITDA and adjusted EBITDA for the fourth quarter were negative $1.3 million versus a negative $567,000 in the prior year. Our net loss was $3 million for the quarter compared to a loss of $2.8 million in the prior year. Our quarterly loss continues to include a significant amount of depreciation and amortization expense, which increased from the prior year, attributable to the assets of the Pavilion Theater and the digital cinema systems purchased for our rollout. Also, please note that about half of our fourth quarter net loss comes from non-cash charges, such as depreciation, debt conversion cost, and non-cash interest expense.

Turning to the balance sheet, we had nearly $61 million of cash and short-term investments as of March 31 and improved working capital position due to our recent fundraising activities from our shelf, primarily to fund future of digital cinema related assets, and total lower debt due to conversion of debt into equity during the year, as Bud mentioned.

With that, I will turn the call back over to Bud.

Thank you, Brian. In closing, I'd like to provide a quick update and some thoughts on where I think the industry and we stand.

In terms of a rollout, we're seeing marked improvement in the availability of T System hardware components, specifically DCI-compliant media players. We have received increased commitments from our principle media server [inaudible] meet our previously announced goal of digitizing between 2,000 and 2,500 screens by March 31, and of course, 4,000 screens across the country by November 2007.

As I indicated, earlier, Christie/AIX has digital cinema systems operating in 18 states and 57 cine-plexes. Those numbers are growing, rapidly. As many of you know, we're up to 39 states with all the signings and that number is going to be increasing in the months ahead. We intend to reach all 50 states with this deployment. Additionally, every major studio has a digital movie on a screen, this coming weekend, underscoring studio commitments to digital cinema deployment and the Christie/AIX plan.

I may have misspoken when I said, earlier, that the weekend of June 9, all the studios were on screen. It's this coming weekend with the opening of another movie from the last studio whose name I won't mention at this point, but we will - as a matter of policy, we don't mention studio names, specifically, unless we have their permission. But, we are - this weekend, we will have everybody, all seven major studios, and even one or two independents, on screen in digital.

We're very excited about the developments underway in our industry. Together with our studio and exhibitor hardware partners, specifically Christie Digital Systems and Doremi, we have addressed many of the hurdles which have, in the past, delayed Hollywood's inevitable transition to digital cinema. So, funding the business model is sound and we're beginning to prove that, Thanks to GE and other leading institutional equity investors' interest in supporting the transition is unmistakably clear. Reliability, as proven by our exhibitor partners and at our own Pavilion Theater, the technology works and is working, full time, for paying audiences throughout the country. Content - through agreements with every major studios to release content, there can be little doubt that exhibitors will have new and expanded content choices when booking movies for their audiences. We already see more than enough feature releases planned in digital for the remainder of 2006 to provide comfort to exhibitors that their projectors will remain fully utilized.

We're optimistic and more confident than ever in the future for both our company and our industry. Even with all this progress, there is much work to be done as we capitalize on the unique benefits that digital technology can provide to the studios and exhibitors, worldwide. Benefits that will enable the industry to regain its importance with audiences and redefine motion picture entertainment. With our focus remaining on delivering solutions that combine the best market-proven technology, open interoperability and flexibility, and real-world experience, we believe the future is very bright for AccessIT and want to thank you for your ongoing support. We'll continue to seek opportunities, worldwide, to increase shareholder value and hope to have exciting news in the very near future.

Operator, at this time, I'd like to open the call to questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Your first question will come from the line of Rich Ingrassia of Roth Capital Partners. Please proceed.

Thanks. Good morning, Bud. Good morning, everybody.

Good morning.

Bud, it sounds like Doremi stepped up with the media players, recently, especially in the last couple months, filling the void there by Dolby. But, are there any other equipment suppliers in your package whose output you think could be challenged by your rollout targets? Or for other reasons they need to be watched just here in the near term?

I'm not sure I understood the question, Rich. Are there other manufacturers or other rollout plans? Is that what you're referring to?

No. Other partners in the package of equipment that you're providing to the theaters whose ability to meet output that you require for your rollout schedule could be challenged, here, and -?

Oh, I see. Just the immediate player source.

Like with Dolby.

Components, yes. No. We see no issues there. Christie is well within its capabilities, up to 300 systems a month. The installation rate is building, rapidly. As I mentioned, earlier, we're moving to 200 a month during this quarter. That's our goal and we think Doremi, alone, could meet that. There are other manufacturers that are coming on board but those are plusses to us. They give us more choices, they give us the ability to ramp up and add suppliers in the media area. It's only in the media area that we experience any hasting issue of any consequence.

Okay. It even appears that you're using almost all of Christie's production capacity for projectors. Is that the right assumption?

Yes, yes. No question about it. We're their primary customer. I'm sure that they're selling a few, here and there, outside of the United States. But, without question, this is the most important matter for both companies and we're treating it as such.

Okay. Just a couple more questions if you don't mind. Is it possible that the next major exhibitor commitment comes from outside the U.S. thanks to Dave's efforts?

Actually, no, but because we are very close with a number of significant exhibitors. But, Dave has been unbelievable in creating new opportunities for us, outside of the United States. Both Chuck Goldwater and I and Russ Wintner are looking at these, specifically, and I would say that certainly we're on track to meet at least one of the objectives that I mentioned, earlier, for this year, and that is to get at least a single international initiative off the ground during the course of this fiscal year, but it won't be the next signing. We have several that are imminent, here, in the United States.

Okay. Finally, just a question about the competition. Kodak had its first significant press release in the quarter. Obviously, well behind your progress, but could you maybe assess their capabilities for the rest of the year? Is it possible they emerge as the number two player even ahead of Technicolor?

I - Rich, I try to make a practice of not commenting on other peoples' business plans, particular publicly. So, I'll take a pass on that. We are talking to Kodak. We're interested in their media player as a product that can supplement those that we get from others and we are in sessions with them about that. But, I'll leave it at that.

Fair enough. Thank you.

And your next question comes from the line of Jeff Van Rhee of Craig-Hallum. Please proceed.

Hey, guys. A couple questions. Hey, Bud, on utilization for the quarter, I guess you entered December around 150 units, ended the March quarter around 210. What kind of utilization did you get out of those systems? How many plays did the average system get in the quarter? And then maybe just some thoughts - obviously, you've given some anecdotes, here, about the very high utilization [inaudible] on a handful a weekends. Can you just talk us through kind of the ramp and utilization given the significant ramp in digital content that's now available?

I'm not really able to give you that kind of detail at the moment and I'm not sure that we want to start that process, quite yet. We'll try to give some guidance, later in the year, that will be more helpful to you all. But, I will say that if you - the first 150 out of the 426 or so systems that we installed through the end of May were - we did 100% of the screens, whereas going forward, as you know, we're only doing have the screens, initially, then doing the other half, later. So, adjusted for the fact that we did do the first 150 on all screens - the fact that we had 85% utilization over the Memorial Day weekend, and we expect that to continue and even grow over the course of the summer, is pretty remarkable. If we had only done half of UltraStar and Emagine's theaters, initially, we certainly would've been at 100% over that weekend and very much on plan as far as utilization is concerned.

The movies are coming out, now, and certainly during this period, in digital, even though the studios don't need to get that many movies out in terms of percentage-wise. But, certainly, we're in a trend, right now, where virtually every major movie is coming out in digital. So, we're seeing two and three movies, a week, now, ramping up and anticipate that trend to continue throughout the summer. We'll see about the fall. That may drop off a little bit, and then resume as we hit the holiday season in November and December.

So, all I can tell you is everything is trending upward. We're seeing growth, both in the number of installations, resulting in more theater command center license fees, more transport deliveries, and of course, most importantly at this stage, GDS. We're very gratified at the trends and the numbers that we're starting to achieve and I think that you all will be pretty pleased as you see the next couple of quarters.

While you're on the services, the GDS, presumably, we've seen a sequential increase. What sequentially decreased in [inaudible] services?

What decreased --

Right. Revenue-wise. The revenue number went from 2.8 to 2.5 or 2.75 to 2.5.

It would have to be the Software division in terms of the recognized revenue during the quarter. It's the only thing I can think of.

The seasonality of Pavilion come into play at all?

It shouldn't have. You're talking about quarter over quarter, comparable quarter?

December quarter to March quarter.

Oh. December to March. Yes, it would definitely be seasonality at the Pavilion. We don't - the quarters we've been reporting have been year over year, but not quarter to quarter. But, no question as based on my experience as an exhibitor that the March quarter would not even be close to the December quarter.

And then, Brian, on the P&L maybe on a couple of these line items or maybe this is for you, as well, Bud - the thoughts on expense levels, going forward? SG&A, up to 3 million. And then, what's in the R&D line? Why 24 negative, if I'm reading this right?

The negative in the R&D line was an adjustment we made in this quarter for something that happened in a prior quarter and also just the fact that we're at a higher level of cost capitalization, now. So, our R&D number is just going to be less.

Due to capitalization of development costs.

Right.

Okay.

But, to answer the first question, would you repeat that?

Well, I was just trying to get a sense of both line items. SG&A came in at 3 million. Your thoughts on, sequentially, where each of these go.

Well, you know that in all the resources that go into Hollywood Software's development group, that the supports the TCC, that supports the Digicentral advancements. Of course, the GDS Global product, the international version of TDS, are all hitting the SG&A line. And then, of course, a handful of people who were not around during the last year's quarter at the Media Services division, Chuck Goldwater and his small staff were not with us, for example. We didn't have the insurance costs and attendant costs and marketing costs related to Christie/IAX, last year. So, these are all part of it.

We're spending a fair amount of money, promoting AccessIT in these trade shows, throughout the world. We are being invited to speak. We need to be a significant presence within the 4,000-screen deployment plan, which will end in October 31. Assuming we don't go any further, many of those marketing costs, of course, would go away. But, obviously, that's not our plan. So, SG&A will begin to smooth out and you'll begin to see an escalating revenue stream that'll outstrip that, certainly, in the quarters ahead and we're very much on track to get there.

Okay. Last question unless somebody else [inaudible]. Bud, would you hazard any more detail on the international front? It certainly sounds like progress has been - significant progress has been made. Any thoughts on when you may actually have systems on the ground and operating? I know that's definitely a very forward-looking thought, but it could just speak in the ballpark.

Well, it would be great if we could start something, this year, the actual installations. We certainly want to have something signed up during the course of this year. There are just so many significant things going on throughout the world, in Mexico, Australia, Korea, South Korea, Singapore, and parts of Europe and South America. It's hard to say which one will move the fastest. There are some political issues in some of these countries that will slow the process down, without question, possibly even cause us to decide not to move forward in those countries. But, we are encouraged by not only the recent activity of exhibitors, but as importantly, local and most importantly, the major studios, who are actually setting up meetings for us with some of these exhibitors. Of course, without specifically endorsing our plan, but without question, making it very clear that they're supporting our plan.

Okay. Thanks.

And your next question is from the line of [Steven Suttmeyer] of [inaudible]. Please proceed.

Hello, Bud. Steve Suttmeyer. Actually, I just have a couple questions related to your acquisition of PLX Systems. I just want to know how it's all going to fit into your mix.

This is a rights management, royalty management application software that fits beautifully into the TDS System, which uses the back-office application to provide all of the booking, planning, and accounting for somebody who has a piece of content that's being shown on movie theaters or fixed venues throughout the world. This will supplement, or compliment, that for content owners. The customers for PLX include the major studios. The same customers we're dealing with, everyday, but we see the proliferation of smaller content providers who will increasingly require a full-bundled service and we think PLX, which was a small acquisition for all cash - we paid $1.4 million for the company, in cash, so that there's no stock issuance. But, it's a nice little company that will contribute, immediately, to the software division.

Okay, and you can leverage that across not just major motion picture releases, but also across alternative content? Advertising?

Absolutely. It fits beautifully with all of those new and emerging players in this new industry.

I see. And a question about the alternative content, actually. Is there any indication about when you believe that it will be more mainstream in the industry?

I think it's going to be a ramp-up process because it's kind of a chicken-and-egg situation. As we move to 1,000 screens and 1,500 and 2,000 screens, the level of interest on the part of some of the content owners, in particular, record labels and sports promoters, has definitely indicated an increase. We're looking toward the latter part of this year. I think we'll begin to see some things in September, October when movie theaters typically are a little softer in terms of the content availability. They'll be more proactively looking for alternative content. We're going to try to match that by launching some activity over the course of the summer, preparing for September, October, November, and beyond - a ramp up.

I think the everyday occurrence is probably at least a year away. I think that the - we're certainly going to drive that because we get paid in lots of different ways when alternative content appears on our screens, so we're going to be working very hard. But, I still think it's going to be a process. I really think that the time when we see a concert or some alternative content event on a regular weekly basis throughout the United States is probably a few years away, but I think we're going to begin to see more and more content and more and more media awareness of that content appearing on these screens, starting toward the end of this year.

Okay. And just, I guess, a couple housekeeping questions. I noticed I didn't see a cash flow statement in there. Just wondering - your CapEx and your cash flow from operations.

There will be a cash flow statement in the K. It'll be filed, shortly.

Okay.

Brian, when are we filing that?

Well, it's due by June 29 and we expect to have it filed, long in advance of that.

So, we don't typically, in the past, have been releasing all of that information. It'll be in the K.

Okay. And just one last, I just want to clarify - when do you expect to target that 300 screens per month, again? Is that December or did you say April of next year?

It's April of next year. It's the end of this fiscal year.

Okay, the end of this fiscal year. Okay, thanks a lot, Bud.

Thank you.

[OPERATOR INSTRUCTIONS]

Your next question is from [Ted Bade] of [Canel Capital]. Please proceed.

Hello. I just have three quick questions, I guess. When did you guys say you'll finalize the debt deal with GE and all those details will be hammered out?

Well, they're pretty well hammered out, now. We'll probably be - the closing is imminent.

Okay, sure. And -

By the end of June. By the end of June, it's safe to say.

Okay, sure. I guess, then, you said that to raise more equity. You said substantially all the 4,000 installments, substantially, have been covered with the debt and the equity rates. Will you need to raise more equity, going forward, here, though?

Only to do things other than the 4,000-screen rollout that are accretive for the company.

Okay, sure.

So, an acquisition or a foreign deployment that requires some front-end costs or a significant expansion of the 4,000 screens that overlaps the installation of the first 4,000. All of those things, which are a rich man's problems, in my view, at least. Hopefully yours, would require us to go back and look at the capital market, not necessarily the equity market.

Okay, sure. And, I guess, the last question being when do you guys forecast you will be EBITDA positive?

We have not forecasted when we're crossing over, other than to estimate that certainly by the third quarter of this year, we think we'll crossover. Maybe we'll be able to outperform that. We're not giving specific guidance, at this point.

Okay, sure. Thank you.

[inaudible] very well and the trends are very much in a positive direction, I can say that.

Okay. Thank you.

And your next question is from the line of [Brian Hodger], private investor. Please proceed.

Yes. There have been rumors on stock message boards that your installations are not DCI compliant, or at least that they are not DCI certified, if that even exists. Could you comment on this, as well as any additional costs that may be associated with DCI compliancy? Thank you very much.

Well, the installations that we're putting in will be DCI compliant. There have been some technologies that needed to be decided upon by the studios, which are now installed in the systems that weren't, initially. They include CineLink II and Watermarking. Both of those are now being installed, now that we've come to an agreement with the studios. Those were a very tiny part of the process that the studios require. Needless to say, the studios who set the DCI standards - specifications, rather - were sending movies and playing movies on these screens from the outset, recognizing that it would take a few months to include some of the last pieces.

So, I would say, technically, there are some minor elements still remaining that will be retrofitted. Those are expenses that are part of the deal for Christie. Our costs are not affected by that. That is a requirement by Christie, who will retrofit, as necessary, in the field to meet those specs. There is no third-party certification. By default, AccessIT and Christie have become that certifier, looking at the specs and interpreting them, working with the studios' technology staff. Jeff Prekosky, for example, has regular meetings and conversations with all of the tech staffs of all of the studios, keeping them up to date, sharing information, and making sure that we're all on the same page.

Great. Thank you very much.

And your next question will come from the [Rick Shinefeld] of [Shinefeld Associates]. Please proceed.

Actually, it's [inaudible] from Shinefeld. But, my question is actually - I was hoping you could comment on your progress with installations in theaters and cinemas beyond those you included in your initial projections. I'm thinking, specifically, of a consortium whose name escapes me that you spoke of that has about - I think it's 12,000 screens, nationwide, and to see whether or not you made any progress there or at other big chains or consortiums.

Well, I'm sure you're referring to National CineMedia.

Yes, that's it.

That's a consortium of Regal Cinema, AMC, Lowes, and Cinemark. That consortium primarily deals with pre-show or advertising on the screen and that's been a very effective combination from what I can gather from each of the participants. That consortium, several months ago, announced that they were going to attempt to create their own deployment plan for their own screens and they are in the process of trying to garner studio support, which they have not, to our knowledge, received as yet. That is a significant hurdle because the studios are not historically given to working directly with exhibitors. There are many issues, legal and otherwise, that - and just historical perspective that makes studios nervous, and at some level, should make exhibitors nervous when they get that close in a business deal.

The next hurdle will be technology, which is the same hurdle Technicolor and any other deployment plan would have to deal with, and it's clear that we're far ahead of any of our would-be brethren - and I say brethren instead of competitors because while it is a bit of a real estate grab, our goal is to do 10,000 screens. Not all 37,000, here, in the United States and Canada. And we want to at least double that, outside of the United States. So, we're well on our way to meeting our objectives, and frankly, anything that advances digital cinema increases the universe of digital installation. It is good for our transport business, good for our emerging ancillary businesses, piracy detection, watermark detection services, our alternative content business. All of these things are good for the industry and good for us.

But, getting back to this, they're - we may very well be in a position to work with these folks. We've certainly let them know we're willing and able to. And there may be some progress, in the future. I certainly am not in a position to comment on conversations that are occurring between us. But, be that as it may, you can be sure that we are willing and able and in conversation with everyone in the industry who's interested in digital cinema.

Great. Thank you.

And that concludes our question-and-answer session. I would like to turn the call over to Mr. Mayo for closing remarks.

Once again, everyone, thank you for the support you've given us and the faith you've had in our management team. We're not going to fail you.

Thank you for joining us, today, and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation and you may now disconnect.

Have a wonderful day.