Cineverse Corp (CNVS) 2009 Q2 法說會逐字稿

Good day, everyone, and welcome to this Access Integrated Technologies Second Quarter Fiscal Year 2009 Earnings Conference Call.

(Operator Instructions). Listeners are cautioned that some of the material discussed today may include forward-looking statements regarding 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 in certain functions, and there can be 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 the future results. You are encouraged to read the Company's Securities and Exchange Commission filings.

Now I would like to turn the presentation over to your host for today's call, Mr. Bud Mayo, Chairman and Chief Executive Officer.

Good morning, everyone, and thank you for joining us today for AccessIT's Second Quarter Fiscal 2009 Investor Conference Call. With me today on the call is Brian Pflug, our SVP of Accounting and Finance; and [Eddie Patel], our VP and Treasurer.

I'm pleased to start today with some financial highlights. Overall, we've seen a 6% increase in total revenue since the last quarter and a 12% increase year over year in quarterly revenue. Strong virtual print fee performance and a 30% increase in quarter-over-quarter transport revenue contributed significantly to these increases. In fact, EBIDA for our satellite transport division, digital media services, was up 29% quarter over quarter and has positive EBIDA for the second quarter in a row.

On the content and entertainment side, revenues increased slightly overall. The Bigger Picture provided more revenue as a result of increase content distribution, which also contributed to the success of the digital media services division because The Bigger Picture uses its transport services.

UniqueScreen Media showed a quarter-over-quarter increase as a result of the Screenvision agreement we signed in September, which I'll discuss later.

In the content and entertainment segment, we saw a reduction in the EBIDA loss, a direct result of increased revenue and decreased expenses at The Bigger Picture.

For the Company as a whole, quarter-over-quarter gross margins decreased slightly, primarily due to increased payments to theatres for termination of unprofitable contracts at UniqueScreen Media. Adjusted EBIDA margin, however, was up 1% from the June quarter as a result of continued tight management of SG&A expenses across all business units of the Company.

The quarter's operating income, year over year, improved significantly from a loss of 7% of revenue to income of 7% of revenue and more than doubled from approximately $700,000 in income last quarter to a record $1.5 million in quarter two. This is attributable to modest revenue growth coupled with aggressive expense management. Despite increased year-over-year depreciation, we showed operating income of that record $1.5 million versus the prior year's loss of $1.3 million.

Adjusted EBIDA increased from $10.2 million in the first quarter to $10.9 million in the second. The increase from the prior year's second quarter was 59%, up from $6.9 million. We're pleased that, although this is the third quarter without AccessIT's screen count growth, we continue to see improved adjusted EBIDA margins and operating income.

One final note on the financial highlights for the quarter is that we began making principal payments on our GE phase-one credit facility. These totaled $3.9 million for the quarter. Cash collections in phase-one subsidiary exceeded principal and interest payments by more than $4 million in the quarter.

Ladies and gentlemen, this has been a challenging time for even the most established companies, and AccessIT is no exception. But we remain optimistic about our growth prospects and our ability to meet our obligations as they become due at least through the next year. The market uncertainty is too great for us to offer much visibility over the next 12 months, but the disciplined expense controls we put into place, combined with our effective business, model leave AccessIT with options, despite the frozen markets.

Of course the main driver for our growth is the installation of more digital cinema systems, which requires, ultimately, the raising of reasonably priced debt.

Until the credit markets return, our strategy for phase-two deployment is as follows - one, to sign exhibitors to our phase-two Master License Agreements and tee up thousands of installations with site surveys and site preparation, so we can move quickly, as soon as credit lines from any source open up; two, to sign supply agreements with all major hardware vendors to lock in competitive pricing now and to continue with supply as we did in phase one; three, to sign additional movie distributors to VPF agreements as we did in phase one; four, to work with hardware vendors and interim financing sources to secure enough financing to allow installations to begin immediately and on as large a scale as possible, beginning in this quarter; five, to advance our program with the NATO cooperative buying group, or CBG, to accommodate each of its members' 8,000 screens in all categories, with a target to begin signing Master License Agreements for many of its members in the March quarter; and, finally, six, to redouble our efforts to bring compelling, nationally recognized programs to our exhibitor partners in live 3D in the March quarter.

To do this we plan to utilize our proprietary CineLive network along with our nationwide advertising and marketing reach. We know that demand for live 3D will also strengthen the demand for digital cinema systems that drive our revenues in all divisions.

The articulation of this strategy brings me to some of the second quarter and even more recent successes I'm pleased to share with you today. First, we began our phase-two deployment plan in October and, to date, have signed agreements with three exhibitors for a total of 493 screens, with 8 screens already installed and more than 40 planned this quarter.

We are working with several potential sources for funding, including some we hope to announce very soon. Additionally, we've now completed virtual print fee agreements for phase two with five studios - Disney, Fox, Paramount, Universal, and Lionsgate. And we've added Overture Films as our ninth studio for phase one.

We continue to move forward on phase-two agreements with Sony and Warner Bros, as well as other independent studios. And we expect to be signing more exhibitors in the months ahead.

As we previously discussed, phase two will be a vendor-neutral plan, and as such, to date we have signed agreements with two major projector manufacturers - Christie and Barco - to supply digital cinema systems and services in phase two. We anticipate additional vendor agreement announcements shortly.

As I mentioned during the financial highlights, the digital media services unit, which provides both satellite and hard drive delivery, continues to improve. In the second quarter the business unit delivered features from nine distributors, including our own subsidiary, The Bigger Picture, and trailers from 18 different distributors. These totaled more than 3,600 feature deliveries and more than 24,000 trailer deliveries to digital cinema complexes throughout the United States and Canada. And these were not just those that AccessIT deployed. As the universe of digital cinema screens grows, we expect DMS to do the same.

Our Theatre Command Center software has now supported more than 9 million shows and continues to be, by far, the most widely used and reliable theatre management system in the world. With the first international installations in place in Ireland and the commencement of phase two in October as targeted, additional screens will begin to use this software, making it the global standard and adding to AccessIT's leadership in digital cinema.

As I mentioned above, The Bigger Picture increased the number of alternative content events they provided to audiences this quarter, increasing audience sizes, number of theatres booked, and creating industry-leading momentum in the process. Most recently, The Bigger Picture worked with Apple Releasing, the Beatles label and Cirque Du Soleil, to distribute an Oscar-worthy documentary called "All Together Now" on the making of the Las Vegas Cirque Du Soleil show, "Love." This one-night-only event was the highest grossing in The Bigger Picture's history.

Some of the other noteworthy musical acts, whose concerts became theatrical, one-night-only events, were John Mayer, Three Days Grace, and David Gilmore.

And our most mature channel, Kidtoons, provided its highest grossing event ever in July when Thomas the Tank Engine came to theatres in "Thomas & Friends - The Great Discovery" movie.

UniqueScreen Media, as I mentioned earlier, signed an important agreement with Screenvision, which will allow USM exhibitors to supplement USM's local advertising with national ads supplied by Screenvision's excellent sales team. We expect that this, coupled with significant cost reductions and the elimination of unprofitable contracts, will bring this subsidiary back on track as a profitable part of AccessIT.

At ShowEast in October, we created quite a buzz by demonstrating our 3D capture on the tradeshow floor. We did this to highlight our CineLive product and to show exhibitors and content providers alike the ease with which 3D can be captured and viewed by audiences. Our CineLive deployment is in process, heading to 100 sites and top markets throughout the country. And we are working to bring 3D live content to our exhibitor partners' top screens in the next calendar year.

Our creation and deployment of CineLive further enhances our digital-cinema platform and the unique solution AccessIT provides to those exhibitors who partner with us in both phase one and phase two.

At this point, I'd like to turn the call over to Brian, who will comment further 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.

I'll begin by reviewing our quarterly operating results.

Our consolidated revenues for the second quarter ended September 30, 2008 were $21.8 million, which is an increase of $2.4 million, or 12%, from the comparable prior year quarter. This also represents a $1.3 million, or 6%, increase in revenues from our quarter ended June 30, 2008.

The increase in our reported revenues from last year's second quarter continues to be driven by our media services segment, which increased by $3.8 million, due to virtual print fees and movie deliveries. Partially offsetting this was a year-over-year decline in revenues of $1.4 million in the content and entertainment segment, due to reduced in-theatre advertising, mostly attributable to our elimination of various underperforming customer contracts and due to continued economic factors.

Regarding adjusted EBIDA, our media services segment increased from $7.9 million last year to over $12 million this year, and increase of nearly 60%. This performance is also due to the digital cinema business, which has high EBIDA margins, and ongoing cost containment in the other units as well.

Our content and entertainment segment experienced lower year-over-year adjusted EBIDA; however, it was tempered by the reduced expenses we've been able to manage. And the segment adjusted EBIDA improved versus the first quarter.

On a consolidated basis, our direct operating costs have been reduced in the year-over-year period and as a percentage of revenues stands at approximately 30% for the second quarter. The change is primarily due to personnel reductions and expenses related to our theatre advertising contracts in our content and entertainment segment. As noted, we've pulled back in that area in order to form a smaller, yet, hopefully more profitable business.

Direct operating expenses did increase from Q1 as costs to exit certain theatre agreements had some impact. But this is not expected to continue beyond Q2. Our resulting gross margin was 69% for the quarter, from 64% in the comparable prior year quarter and 72% in our quarter ended June 30, 2008.

Our overall selling, general, and administrative expenses have also declined versus last year's second quarter and, as a percentage of revenues, stands at 19% for the September, 2008 quarter versus 23% in the June quarter. A major cause of this was the consolidation of sales and other personnel within the advertising business and ongoing cost containment efforts elsewhere.

Our total company headcount was 252 employees as of September 2008 versus 319 as of September 2007.

As a result of the foregoing, our adjusted EBIDA improved to $10.9 million for this quarter compared to $6.9 million in the prior year and $10.2 million in our first quarter. It should also be noted that adjusted EBIDA has exceeded all of our interest expense for the last six quarters - a trend we expect to continue.

Interest expense has increased in the year-over-year period, consistent with the balance of the GE facility and the senior notes issued in August 2007. Interest expense decreased, however, from the first quarter due to a lower interest rate and the reduced principal balance on the GE facility.

This quarter also includes a charge of approximately $700,000 to reflect the change in fair value of our interest rate swap, which our phase-one subsidiary executed in April 2008, to effectively pay a fixed rate of 7.3% on 90% of the amounts outstanding under the GE credit facility. This charge was indicative of the change in outlook for LIBOR rates from June to September. However, the swap was still in the money by $1.6 million as of September 30. Going forward we will continue to record future changes in the fair value of the swap contract through income each quarter.

Our net loss was $6.3 million for this quarter versus $9.3 million in the prior year. And the current quarter's loss includes $10.3 million of noncash charges, which, as in prior periods, is more than our reported net loss. The September 2008 quarterly loss includes $6.2 million of cash interest, primarily associated with the GE credit facility and our phase-one subsidiary, plus $800,000 of noncash interest.

Our net loss for the quarter also reflects higher depreciation expense, which increased from the prior year due to our phase-one deployment-related assets.

Turning to the balance sheet at the end of the second quarter, we held cash of over $23 million, and working capital was approximately $11 million. Following the phase-one completion and pending any phase-two activity, our asset base has now peaked, and receivables have declined, which, along with improved operating results, brings us to positive operating cash flow of approximately $15 million for the year-to-date September period.

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

At ShowEast in October, we created quite a buzz. And I mentioned that earlier. And I will return to it only to assure you, ultimately, that this is the future of AccessIT and to assure you, as well, that the management team and Board of Directors are on the same page and remaining positive about our business plan and the enormous opportunity we've just begun to exploit.

While we await the return of the credit markets, as well as some return to reasonable valuations in the [microcast] space, we continue to do so and find creative ways to advance our business plan across all business units by reducing costs, conserving cash, growing organically, and creating strategic alliances.

You've begun to see how we're using this pause in our installations to revisit every part of our business and each and every expense. We pledge to continue to do so.

Now I'd like to open the call to questions.

(Operator Instructions). And we'll go first to Richard Ingrassia with Roth Capital Partners.

Bud, you have Premiere and Dickinson and nearly 500 screens signed for phase two. And I know you mentioned something about near term options for financing but nothing formal. Can you just say a little bit more about how those deployments get financed?

I can certainly speak to that. As we've mentioned in earlier conference calls, we started almost a year ago recognizing that there would be some choppiness in the market and that we ought to look at alternative sources of financing, just to at least be sure we could get it started by the end of this year.

And it's a good thing we did. Never in our wildest dreams would we have expected the economic crisis that we find ourselves in and the disappearance of credit markets. But because we did start, we've made great progress with a number of alternative sources, who we'll identify with specific announcements in what we hope will be the very near future, to help fund the installations.

Obviously the vendors will play a part in this, but bankers and other sources of private equity understand the debt model. We've created it. We've explained it. We've proven it. Our systems are already installed. We've demonstrated that we could keep doing this over and over again in a completely vendor-neutral environment. Our systems are operating at 99.9% reliability for over 9 million shows. And that will serve us well as the global leader in this particular segment.

The studios are very enthusiastic about moving this forward. So are exhibitors. The only missing piece right now, and we're working diligently on it, is to fill the gap with some reasonably priced interim financing. And we have reason for some optimism in getting that going.

Okay. Just one other question - Does the agreement announced today with Barco for 5,000 systems alter the agreement you have today with Christie at all? And a second question, I guess, related to that - Did you feel it was necessary to secure other vendors because Christie's capacity could get constrained should DCIP get funded?

Well, first of all, Christie is our trusted partner. They have been for years. We made history together over the last three years. And we intend to continue to do that. We announced, when we initially announced that phase-two plan, that it would be vendor-neutral. Our architecture always has been. We're welcoming Barco and potentially others to the game who have trusted customer relationships that go back many years, and they bring them with them to the table in phase two. In no way does this affect our relationship to Christie. And what we're expecting here is to be able to move very swiftly in multiples of the speed with which we were able to do in phase one and recognizing, in particular, now that DCIP is teeing up their start as well - also constrained by the credit markets.

What we really need to do, as I said earlier, is get everybody ready. There's a lot of preparation work that has to be done by every exhibitor. We intend to sign thousands and to start rolling out whatever we can finance from any source. Christie and Barco and potentially others can participate in this deployment plan and lock in some reasonable prices, as well as ensure supply. And we have no indication that Christie can't meet that, but I think it's just prudent business to make sure that we have as many suppliers as we need to meet the demand.

We'll go next to George Grose with American Capital Partners.

Could you breakout the EBIDA between your AIX/Christie and then the content and entertainment?

Well, it's segmented, and you'll see that in the Q. There will be a segmented P&L for the two segments, which is how we've reported it in the past. What I did say is that the debt service in the deployment subsidiary, which is just a part of media services group, was exceeded by revenues on EBIDA - actually, EBIDA - in that business unit by more than $4 million. And I'll just stay with that statement for now. If you want some further clarification, it exceeded $12 million for the quarter.

And that's for Christie/AIX?

That's correct.

In content and entertainment, are we sort of getting towards the end of the burn there? You mentioned you have to pay off some unprofitable contracts on the advertising side.

Well, we're managing the business - that means managing every expense, examining every expense and every contract that doesn't make sense. We continue to do that as we move into this quarter. There's no indication that we have any substantial cash burn. And I'm not even remotely implying that that's the case for us. We feel that we can easily manage, based on the results that we've shown in the last few quarters and extrapolating that-- that we can meet our needs as they come for at least the next year or so. So between our cash reserves and our cash flows, which we expect to improve, of course, we can meet our obligations. This is not to say that we have a robust cash-flow-generating machine here. And I'd be foolish to suggest that. But the numbers speak for themselves.

As Brian indicated, we've generated operating net cash flow for the six months of over $15 million. And we have operating income. We have cash flows that can enable us to meet our obligations as they come due. And we expect those to grow.

And you say within next year. Is that the next fiscal year or calendar year 2009?

I'm looking at all of 2009, calendar year and beyond.

The previous caller mentioned about the vendors-- you signing up the vendors. If I understood correctly, they haven't stepped up yet and provided some financing.

We are not commenting on that right now. We'll be announcing financing as it becomes firm and available to us beyond the eight screens that we've already done. And what we'll do is announce that specifically as it comes due. It's not our policy to announce agreements in principle or what we believe is going to happen when it comes to something that specific. So I would suggest that we wait a while, until those amounts are secure.

We'll go next to Scott Preston with Maven Funds.

I just have two quick questions. Brian, on the GE debt, what are the payments -principal and interest - in the next two quarters that are coming due?

There are principal payments due of approximately $1.9 million a month.

Okay. And then what's the interest?

The interest would be roughly 7.3% of the balance, which you could ballpark at between $1.1 million and $1.2 million a month.

And then on the sub-debt, are you guys going to be paying--? Do you continue to expect to be paying that in cash or a combination? I know the last payment was in cash. What's the plan on that going forward?

Well, first of all, it's not sub-debt. You're talking about the $55 million senior notes that we placed last year?

Yes.

They're senior unsecured notes.

Okay. They're senior unsecured notes.

And at these prices, we have no present intention of paying in stock.

Okay. So what would be the cash interest due on that the next two quarters? Do you have that number handy, by chance?

It's $1.375 million a quarter.

Okay. Brian, another question for you - What was CapEx in the past quarter? Do you have that number handy?

CapEx would have been very low. You'll actually see that on the cash flow statement that we're going to file. We don't have any meaningful CapEx today that's coming out of our existing cash reserves. With phase one being done, the whole rest of the business is really not all that capital intensive right now. We do have our ongoing CineLive deployments, but that's being funded out of our NEC facility. So there's really nothing else of substance to really talk about.

Until we start phase two, there won't be any meaningful CapEx. And we expect that CapEx to be funded through a combination of exhibitor contributions and long-term debt.

Going back on that real quick-- I know Rich asked a question-- In phase two you've announced a couple deals. Those we should assume will not be in place until there's some sort of financing around. You guys won't put up cash to put those initial ones in. Is that correct?

That's correct. We will not use cash from our balance sheet to fund those installations. We will be seeking and expect to get some additional funding directly for those deployments.

(Operator Instructions). We'll go next to [Andrew Hart with Next Capital Management].

How were the eight initial deployments funded? You said in phase two that eight screens were actually put out there. How were they actually funded at this point?

Debt was provided from the vendor for those eight screens-- and, of course, a combination of the exhibitor contribution.

So they were funded 100% either through exhibitor contribution and vendor debt?

That's correct. It involved no equity contribution from AccessIT for those eight screens.

(Operator Instructions). Well go next to Adam Mizel with Aquifer Capital.

Bud, could you give us a little bit better sense of your vision of what's happening at this Company over the next 12 months? I happen to be sitting in front of the screen. I can tell you the market's interpretation right now of what you're saying is that the Company is going bankrupt - that the stock is down 22%. And people, I think, are interpreting that there are really bad things happening. You can listen to the questions that were just held, trying to figure out if you can add up to have cash to meet your obligations. And I think the conclusion that the market is reaching is you do not. And if that's incorrect, I'd like to have you try to help me understand what we're not hearing or what people aren't hearing to understand what's happening going forward.

Well, as I've said, we are confident we can meet our obligations based on the results that we've been having, which we actually expect to improve upon. But assuming a steady state of what we've experienced in this quarter, we are fully confident that we can meet our obligations - all of them over the next year or so. If that's the question, I think I've answered it, perhaps not to the satisfaction of everyone - whoever that is who's reacting to that. As I've said, and I will repeat that we feel confident that we can meet all of our obligations in the coming year and beyond.

Beyond that, I'm not offering any specific visibility to what's going to happen, until we start rolling out phase two, which we expect to be accretive in many ways. And until we make announcements of specific events that we will be bringing to market-- which will be accretive based on where we are today. In this economic environment, I think that anybody who proposes to say that they know exactly what's going to happen and when, I think, is being very disingenuous. My statement is that we are situated to take care of ourselves, on a base-case basis, and are positioned to grow. That's our job and to manage expenses and continue to trim those expenses as necessary to maintain a cash flow situation that can help us sustain, throughout a terrible market, our obligations and our business so that we can benefit when things turn around again in the debt and equity markets.

When you think about your business-- the almost $11 million of EBIDA that you earned this quarter-- All of that is coming from the digital deployments and the satellite movie distribution components, as evidence by more than $12 million of EBIDA at that subsidiary level and then some modest EBIDA loss in the content side of the business, which you keep driving toward zero. And those are all long-term contracts. That just tells me that the kind of EBIDA I'm seeing right now is not exposed to macroeconomic risks. It's not exposed to a lot of other risks that other businesses have to wrestle through over the next number of quarters or years in the economy. It's a pretty stable cash flow. Am I assuming that correctly?

Well, we think it is. I think one of the advantages that AccessIT has is that its business relates to the movie exhibition industry and to movies generally. And that marketplace has proven to be very resilient - very recession proof over many, many years and many, many dips in the economy. People still go to the movies. It's a bargain. It's the best deal in town. It always has been for a family. And so even in a recessionary environment or any downturn in the economy, people still need to get out of their houses as families. And maybe they won't go to a $250 concert or Broadway play, but they're going to the movies. And we're the beneficiary of that kind of consistency. And, certainly, we feel good about that. And, certainly, that drives the consistent revenues that are predictable over many, many years into the future.

So as an investor, we should be looking at a company that has, call it, somewhere in the mid-forties of EBIDA on a going-forward basis, tied to early days of ten-year contracts that produced that EBIDA. Tell me when I (inaudible) incorrect.

That's true.

And then, beneath it, the fixed-obligation component, pays about 7.3% of interest on $195 million or so of debt to GE and declining and, so, pays about $15 million of interest expense to them, pays $5.5 million of interest expense to its senior notes, and has some other modest amounts of pieces of debt that maybe is another $1 million. So it pays $21 million of interest expense, amortizes $1.9 million of principal per month to GE, which would be about $23 million on an annualized basis. So if I'm doing my math, that's almost about $44 million of interest and amortization, assuming you pay the senior notes in cash against approximately $44 million of annualized EBIDA this quarter. It could grow over time, given the nature of the VPFs and the [satellite] delivery. And the interest expense will be declining as you obviously pay down principal.

I'm looking at that math and saying basically-- I think what you said before-- It is a picture of a company that can meet its obligations, will start producing some modest free cash flow as debt declines through amortization, and you have less interest expense, and that is waiting for the finance markets to actually install more screens on phase two, to allow DCIP to install screens on its own installations, which would drive more satellite delivery revenues. And so, in some ways, we as an investor should step back and look at a company that is able to maintain itself while waiting for the credit markets to actually allow it to execute the next phase of its business plan. But there's nothing out there that is, I would describe, the proverbial gun to the head. Tell me if I said anything wrong because I don't think anyone believes that.

You haven't said anything wrong. It's exactly the way we look at our business. If there's any level of uncertainty about anything that we've said, which is consistent with your analysis, by and large, because of the conditions that are surrounding all of us. And that's the only caveat that I would put into it - that, in any market, for the CEO or CFO of any company to wax total optimism about everything they're doing, is just foolhardy. What we're doing is creating a business that can sustain itself. We've done that. We're blessed that we've completed this enormous investment. And now we can sit back and manage it.

We're in the asset management business, but we're not giving up our growth opportunities. We see organic growth opportunities without having to add more screens. The Bigger Picture can bring more content out to the existing basis screens. Our satellite delivery business can increase its deliveries, at least, of hard drives, no matter how many screens are out there and whether we do anymore or not. They can add customers among the studios and increase their revenues and margins.

Our advertising business can add advertising screens. They may not do the kind of revenue per screen that they used to do in this economy, but they still add revenue and margin in doing it and be smart about how we do it by not signing contracts that are underwater and eliminate the ones that are, which is exactly what we've been doing - to trim the fat wherever we can, to make the painful decisions of shedding employees who've given service to the Company - but doing what is necessary to save the rest of those employees and to maintain the position as a leader in this environment - in this new industry that we've helped create - and to be ready to jump right out as soon as the markets return with a very rapid installation pace that will be accretive to the kind of numbers you're seeing today.

Is there any risk that GE could accelerate your amortization? Is there some covenant you could trip where they could demand instant repayment? Is there anything like that that could happen based upon what is going on in the business in the world today? --in your business, not the world.

For you to say any risk-- Of course there's some risk that that could happen. If there's a significant downturn in the VPF levels and the rate of the turnover, there's always a potential risk of going out of covenant-- not missing payments in any realistic way. But, certainly, there has to be-- I could never say there is no risk.

Based upon the ordinary course of business operations--

(Inaudible). We don't anticipate going out of covenant with GE. Let me just make that clear. We do not anticipate going out of covenant with GE.

And so, as you said, if DCIP can do installations or other things that drive growth, whether you start phase two or not, a number of your other businesses would see incremental revenues in EBIDA from that?

That's exactly what we're working on as well. We're not going to just sit back and wait for phase two. Anybody in AccessIT will tell you that, when preparing the budgets for this fiscal year, I would not accept any assumption that phase two was going to begin until it did. Then we would redo our budgets internally and expect results that would be incremental. What we're doing now is managing what we have and trying to concentrate on organic growth within that without CapEx increases of any consequence, maintaining our cash reserves, using the businesses we've already created to maximize revenues, finding ways to do that, and reducing costs - what any business should do - in particular, in this kind of environment.

And I'll say this, Adam, this pause over the last three quarters of installations has really given us a rare opportunity to look at everything we do and how we do it, which we really would not have the opportunity to do if we were running at 100 miles an hour seamlessly right into phase two. This has actually been a good thing - for a while. We're tired of it. We're ready to get going again. And, in fact, in this quarter, as we said we would, we're starting phase two. We're not starting it with hundreds or thousands of screens right out of the box, but we're starting it. And that's meaningful to us.

We've invested a great deal in the preparation for phase two, and we will continue to commit to doing this. But, as you said, we'll do what we can and standby, create the base, improve the base, and be ready to jump off and exploit any credit opportunities that make their way to us. And these are not always necessarily traditional credit sources. We know that GE, our trusted lender and one that we've built years of credibility with, is not closing deals right now in the credit markets. We know that our advisors on Wall Street have said that the credit markets right now are shut down. Unless people are watching the Disney channel, they know this.

And this is a reality that every business has to deal with today. And we're dealing with it, I think, very effectively as the last few quarters, I think, indicate.

You've installed, you said, in October, 8 screens for phase two and are planning another 30, I think you said, in December?

Well, we expect to have as many as 40 in December, actually.

And will each of those screens be, incrementally or on a marginal basis, cash flow positive after debt service to the Company?

Yes.

So they will add EBIDA to whatever-- Wherever you are today, each of those screens will be adding EBIDA on a going-forward basis once they're installed?

That is correct.

EBIDA and adding cash flow after debt service?

That's correct.

(Operator Instructions). That concludes today's question and answer session. I'd like to turn the conference back over to Mr. Mayo for any additional or closing remarks.

Well, my only closing remarks are to really say thank you for joining us today and for your continued interest in AccessIT. I can assure you, we're doing everything we can. And I thank Adam for the really good questions that enabled us to clarify, hopefully, for many of you exactly what's going on in this company.

The best is yet to come. I can't imagine that we could be in better poise to take advantage of this enormous opportunity in front of us called digital cinema and everything it implies.

So thank you very much, and have a great day.

Ladies and gentlemen, that does conclude today's conference. We appreciate your participation. You may disconnect at this time.