Cineverse Corp (CNVS) 2011 Q4 法說會逐字稿

Good day, everyone. Welcome to the Cinedigm Digital Cinema Corp. fourth quarter 2011 earnings conference call. Today's call is being recorded. Listeners are cautioned that some of the material discussed today may include the forward-looking statements regarding Cinedigm'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 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. Adam Mizel and Mr. Gary Loffredo, Co-Chief Executive Officers. You may begin.

Well, you missed that a little bit. This is Chris McGurk who is the current Chairman and Chief Executive Officer of Cinedigm. Thank you, operator. Good morning, everyone, and thank you for joining us today for Cinedigm's fiscal 2011 year end investor conference call.

As the operator said, with me is Adam Mizel, CFO and Chief Strategy Officer; and Gary Loffredo, our Senior Vice President of Business Affairs and General Counsel. I will begin with a brief overview of our very successful operational and financial performance in fiscal 2011. After that, Adam will cover the financial results and then we will be pleased to answer any questions you might have. Fiscal 2011 ended March 31 with an outstanding year for Cinedigm on many levels. Let me quickly highlight some of our most important accomplishments.

First, we had a very successful and seamless senior management transition following Bud Mayo's retirement last June. From June through December, Adam Mizel and Gary Loffredo operated as Co-CEOs, during which time we didn't miss a beat and continued our impressive progress. I joined the Company in January of this year as Chairman and CEO. A CEO transition can be challenging to say the least and we are proud that we maintained and even accelerated the Company's positive momentum during this time.

That is an important reflection of the talents and commitment of our entire management team. Adam, Gary, the Board of Directors and I are extremely grateful for that commitment and the great effort put forth by all the members of the Cinedigm team during this period. Second, we significantly accelerated our digital screen deployment program as exhibitors began to see the clear benefits of going digital from both an operational and revenue standpoint. Indeed, in the fourth quarter of fiscal 2011 we signed new license agreements for 1,402 screens, by far a multi-exhibitor quarterly record for the Company.

And this momentum is continuing in the current fiscal year as we are in advanced negotiations with exhibitors representing approximately 1,500 screens as part of our approximate 4,000-screen pipeline. Deployment in North America is reaching critical mass with about 18,000 screens installed across the industry and over 25,000 under license to be deployed. And we clearly continue to be a leading player in this transformation within excess of 8,300 screens now in partnership with Cinedigm.

Third, an improving economy combined with a late 2005 installation deadline and our studio agreements have provided both renewed confidence and increased urgency among exhibitors to move forward and become customers of Cinedigm. We are especially proud that just a few weeks ago we announced the signing of a deployment agreement with our 100th Phase II exhibitor. All told, Cinedigm has now signed over 8,300 screens at 786 sites and 119 exhibitors and has installed over 6,300 screens.

Fourth, our software business is experiencing accelerating demand as the digital conversion process reaches critical mass. This has led to significant new sales accomplishments during the year and the last quarter, including AMC, the second largest domestic theater chain, selecting our Exhibitor Management Solution for its North American sites. Additionally, Cinedigm secured a multi-year contract with an India-based global telecommunications company for its end-to-end booking, delivery, information and feeder management software platform.

As part of our overall global expansion strategy, Cinedigm is also engaged in numerous pilot programs throughout Europe, Latin America and Australia that we expect to translate into sales as these exhibitors secure digital cinema financing. We were expanding our team to take advantage of these opportunities, most prominently starting with the return of founder David Gajda as Software Division Chairman. This solidly positions us for tremendous growth in the coming months and years.

Fifth, we have reenergized and refocused our alternative content business with strong early results. The year saw a series of pioneering firsts for Cinedigm including the first ever live 3-D wide release music performance with the Foo Fighters, the first international live 3-D sporting event with the FIFA World Cup finals, the historic tenth anniversary special release of "Memento" with an exclusive Q&A with Christopher Nolan and the list goes on and on. These events ran in off-peak times in the theaters, often midweek, and every program gave an avid fan base a unique viewing opportunity while providing the exhibitor community incremental revenue from box office and concessions.

And subsequent to year end, we announced we will be distributing the groundbreaking documentary "Life in a Day" in conjunction with National Geographic Entertainment and YouTube. Additionally, we recently announced a partnership to distribute John Carpenter's indie film psychological thriller "The Ward." That leads me to my final point. A statistic that continues to astound me is that only about 5% of seats are occupied in theaters Monday through Thursday, and only about 15% to 20% of all seats in total are filled on an annualized basis.

That means theaters are empty upwards of 80% of available times on average, and yet the domestic box office is still up more than $10 billion annual business. So just a small incremental increase in capacity utilization through alternative content programming has the potential to create a huge new business. To take advantage of this big opportunity, we were working off the backbone of the digital cinema platform and the very targeted and efficient distribution model it allows to secure exhibition partners for a new initiative, The Cinedigm Network.

Focused on providing programming to exhibitors during off-peak times while creating a true economic partnership between Cinedigm and exhibition this network will offer ongoing programmatic content in a channel format including independent film series, action sports series, cultural events and more. This proposition will create significant business upsides for all partners.

Exhibitors will clearly benefit from both increased box office and concession revenues. Consumers will benefit from a unique, enhanced and communal theater experience and the producing community will get an outlet for programs it wouldn't normally get at theatrical release. We hope to secure our first exhibitor partners in the next 45 to 60 days and look forward to sharing these exciting developments with you over the next few months.

From a financial perspective, fiscal 2011 was the best and most important year in the Company's history. There were many significant milestones achieved during the year, perhaps most importantly the first ever annual positive adjusted EBITDA performance from our non-Deployment businesses in the Company's history. We consider this a very important indication of our progress and prospective performance.

Now as we have done in the past few quarters, I would like to take a few moments now to review Cinedigm's overall strategy. Cinedigm is a digital cinema services and content marketing and distribution Company driving the conversion of the exhibition industry from film to digital technology. The Company provides a digital cinema platform that combines technology solutions, software services and electronic content delivery services to content distributors and movie exhibitors. Cinedigm is a integrator that has secured ten-year-plus contracts with Hollywood movie studios to pay us virtual print fees, or VPFs, each time a movie first plays on a digital screen for an exhibitor in which we have installed digital equipment.

The digital equipment we provide exhibitors is tied to usage contracts that run through 2022. Based on these contracts, Cinedigm has reduced its initial non-recourse debt of over $225 million to less than $148 million in remaining financing. Furthermore, we own the residual cash flows in the equipment in Phase I. Cinedigm is currently in the process of deploying up to an additional 10,000 Phase II screens under a similar model with studios and exhibitors. However, in Phase II Cinedigm operates in a cost recoupment model in which we act solely as a servicer and we are paid only service fees.

We expect most of the financing necessary for this deployment to not be consolidated on our balance sheet as exhibitors purchase the equipment directly themselves where we capitalize on an innovative lease financing solution we have developed with our lenders. Around this deployment and services capability, Cinedigm's digital cinema platform provides a number of critical services. We receive license and maintenance fees for the software necessary for the operation of the deployments and we operate a combined satellite, hard drive and broadband digital theatrical content delivery network on behalf of our movie studio partners.

Cinedigm leverages this digital cinema platform with applications to capitalize on the new business opportunities created by the transformation of movie theaters into network entertainment centers. The three main applications currently provided by Cinedigm include, one, our digital entertainment marketing and distribution business focused on alternative content and independent film. Two, our operational and analytical software applications. And, three, our pre-show advertising and theatrical marketing business.

We believe we have created the broadest platform and application package in the industry which we offer to our customers as an integrated, connected and optimized total solution as well as a la carte to meet more specific individual customer needs. Our mission through all of our product lines is to provide services and content that give consumers a better, more broad-based and exciting experience in the theater with opportunities to view content in digital 3-D in live and interactive formats and with branded entertainment programming. Now I would like to turn the call over to Adam for a more detailed review of our financial and operational progress throughout our business segments.

Thank you, Chris. Our consolidated revenues from continuing operations for the fourth quarter ended March 31, 2011 were $20.6 million, which is an increase of 31.8% from last year's fourth quarter and a typical 2.5% seasonal decrease from our fiscal third quarter ending December 31. For the year, our Company produced total revenues of $79.9 million which is nearly $11 million or 15.8% higher than last year.

This growth was driven both by the expanding Phase II deployments, increasing VPF revenues and the related increase in our service fees, software fees and delivery fees. First, we will discuss our asset-heavy Phase I and Phase II Deployment segments which include the VPF revenues, expenses, EBITDA, digital cinema assets and non-recourse debt associated with the deployments. Phase I VPF revenues decreased modestly in the quarter by approximately $400,000 year-over-year, or 4%, to $9.4 million. This slight decline is attributable to, but less than, the final contractual 7% reduction in VPF rates that began in November 2010 as actual screen turns increased in the quarter as compared to last year's fourth quarter.

We continue to earn our Phase 1 service fees of 5% of the total VPF revenues and expect this unit's performance to remain consistent with recent results. Phase 2 Deployment revenues were $2.4 million in the quarter versus only $391,000 last year due to our continued ramp-up in installations. We had 785 Cinedigm financed screens active at March 2011 versus just 160 at March 2010. For the year, Phase 2 revenues grew four-fold at $6.5 million.

While the number of deployed Phase 2 screens will soon surpass our Phase 1 screen count we should note that 1,410 of the Phase 2 systems are from our exhibitor buyer program and we do not consolidate and recognize the VPF revenues generated from these systems since we pass through these dollars to our exhibitor partners net of fees we earn for our services. They do generate for our Service Company and our Software Division revenues and are, therefore, an extremely important part of the rollout. Also recall that the VPFs generated from this asset base other than the service fees we earn are all pledged to support the underlying non-recourse debts and do not revert to Cinedigm upon debt repayment as this is a cost recoupment model and Cinedigm has made no equity investment.

Our Services segment provides a variety of services to our Phase I and Phase II deployments as well as to third party customers. These businesses produced a total of $6.2 million of revenues in the quarter including the inter-Company service fees earned from our Deployment subsidiaries, a 63% increase from last year and are poised for further growth in terms of both revenue and adjusted EBITDA as our Phase II Deployments grow and as we continue our growth in the software business. For the year, our Services segment had $19.4 million of revenues including the inter-Company service fees, nearly doubling from the previous year.

Our Digital Media Services unit, or DMS, which delivers movies, trailers and other content on behalf of studios to theaters saw revenues more than double to $2.8 million this quarter versus last year, although EBITDA lagged due to increased shipping costs of hard drives from Fed Ex and UPS. We recently negotiated a round of further volume discounts to address this cost. Our Software unit revenue grew 38% in the year and EBITDA expanded over $1.3 million even as we invested in new product growth. The unit continues to experience strong growth from the Phase II Deployments which generate license and recurring maintenance fees for our Theatre Command Center product, software that allows the theater to operate like an iPod.

On top of this we are experiencing renewed growth in our domestic Theatrical Distribution software product and are the in midst of several large international TCC sales and pilot programs. In addition, we signed a significant six-figure license and maintenance fee agreement with AMC Entertainment for our Exhibitor Management Systems and we are finalizing a significant new arrangement with a studio distributor for our TDS System. We have an active pipeline of potential new exhibitor customers and have recently launched several international TCC pilots. Very little revenue or EBITDA was recognized from these contracts in the fiscal year and we do expect them to meaningfully contribute to growth in the upcoming year.

Over 80% of our expected revenues in software for this fiscal year are tied to contracts in force, recently signed contracts and expected Phase II Deployments. We've added seven people in project management, software development and quality assurance to assist us to manage this growth and influx of new business, as well as allow us to continue our next generation product development. We are excited about the opportunities we see in the software space and expect very significant growth in revenues and EBITDA in this unit based on our recent major customer wins. Our Content & Entertainment segment includes our pre-show advertising business, UniqueScreen Media, and our alternative content and independent film distribution arm.

This segment produced $3.4 million of revenue this quarter compared to $3 million last year, with the increase attributable to the EVO 3-D distribution and the "Memento" re-release in the quarter. US in-theater advertising revenues increased 10% for the quarter due to improved local ad sales. We are seeing improved overall on-screen advertising conditions as we slowly emerge from the recession and from the operating improvements undertaken within USM sales force.

In addition, USM has recently renewed several existing customer contracts and added a new customer from its expanding pipeline. We're optimistic about future new customer additions. USM generated about $600,000 of EBITDA this year versus a loss of $40,000 last year. The momentum of the Content Group has increased since Chris' arrival. In addition to the projects Chris mentioned earlier, we have a number of additional exciting releases and programmatic channel launches in our pipeline that we hope to announce shortly.

We receive significant demand from exhibitors as they go to digital to assist them in filling their off-peak capacity and to work together to maximize theatrical release value and monetize the various ancillary downstream revenues. Our overall adjusted EBITDA was $11.6 million in the quarter, or a 36.6% increase over last year's quarterly adjusted EBITDA of $8.5 million. This strong quarterly EBITDA performance is consistent with our revenue gains, in particular from the Phase II deployed screens, and even outpaces those revenue gains due to the positive operating leverage embedded in the growth of our service fees, software fees and our continued focus on cost controls.

Our SG&A costs have increased year-over-year, though primarily due to non-recurring expenses related to our CEO transition process and other recently completed restructuring steps, increased travel costs and increased healthcare and benefits costs. The non-recurring cost related to the CEO transition have been added back to adjusted EBITDA for the quarter and year-to-date period with $180,000 and $1.4 million added back respectively.

We are now also including stock-based compensation expense in our SG&A and direct operating expense line items rather than presenting this separately on the P&L. Excluding these non-recurring and stock comp charges, our SG&A levels are modestly lower versus prior periods due to cost cutting efforts and ongoing vigilance toward expenses. Adjusted EBITDA in the quarter, excluding the Phase I and Phase II Deployment subsidiaries, was $774,000 and for the year was positive for the first time in the Company's history at $487,000. This represents a continued significant improvement compared to negative $552,000 last year in the fourth quarter and a total $5.2 million positive improvement over the negative $4.9 million we reported for the fiscal year 2010.

As our Deployments continue to grow and as we add new software, service and content distribution events, this performance should continue to improve in the quarters ahead. Our interest expense totaled $6.7 million in the quarter, a decrease versus $8.8 million last year. The interest expense on our Phase II debt was $3.1 million with $1.5 million paid in cash and funded from our interest reserve account and the remainder accrued as an increase in the [net] debt balance. The interest reserve account will fund our interest expense into September of this year at which point we expect to meet our obligations from our cash flow from operations.

This interest reduction was predominantly driven by lower costs on the non-recourse Phase I credit facility as a result of the refinancing that occurred in May 2010 and partially offset by increased non-recourse Phase II interest expense and additional non-recourse debt added with our new installation. The balance sheet reflects total cash and investments of $23 million versus $22.9 million at December 31, of which $12.2 million is set aside as either restricted cash or investment securities to pay interest on the Phase II notes as debt service reserve funds for the Phase I facility and for future purchases of satellite dish equipment.

Our receivables portfolio is growing as our business expands and continues to be in good shape with the majority representing studio contracted payments and adequate reserves on the remaining customer base. Finally, a few words on the current quarter ending June 30. We expect the improvements in our operations and cash flows that were evidenced in the most recent fiscal year to continue.

We expect a solid quarter, though our installations this quarter will modestly decline from our fiscal Q4 as exhibitors in many of May slowed installations as they began to focus on the summer movie season and many of our recent signings expect to ramp up deployments post the summer. Similarly, our recently announced content releases are targeted for late summer and fall after the busy blockbuster summer movie season. Service fees earned from our Deployment and exhibitor buyers will grow with our expanding Phase II installations and pipeline.

As we have discussed, these deployments generate positive operating leverage with additional software license and maintenance fees and delivery fees. In addition, we continue to experience improving operating trends in all of our other units. Finally, as industry-wide digital cinema deployments expand we expect to benefit accordingly and look forward to a year of continued improvements in our financial results. Now I will turn the balance of the call back to Chris.

Thank you, Adam. Before opening the call to questions, let me provide a brief strategic update on where the Company is headed in the near term. In my first five months on the job, it has become abundantly clear that we can accelerate growth and create significant revenue by streamlining the Company's focus in directing our resources and growth efforts toward those businesses where we believe we can be market leaders and truly take advantage of the many opportunities presented by the rapidly expanding digital cinema platform.

That means while we continue to rapidly accelerate our Deployment program, leveraging the favorable market conditions I mentioned previously, as well as our acknowledged leadership position as a digital integrator we will also focus our energies on building our high potential software and content distribution businesses. The growth potential of Cinedigm's software business is enormous. As more and more screens are transformed to digital Cinedigm is in the unique position as a market leader to be the most influential innovator in creating digital cinema software applications that capture and analyze data and create management efficiencies for exhibitors and distributors.

Software will be needed to power 100,000-plus global screens, support studio digital distribution, and gather and analyze playback and booking data. Cinedigm is extremely well positioned to take advantage of this growing opportunity, both by expanding our customer base around the entire worldwide digital platform and by developing new management and analytical tools to help our customers operate their businesses more effectively. We are also in a strong position to develop precision marketing and audience analytic software tools for our studio and exhibitor customers. This is a business we will be aggressively nourishing and growing.

On the content distribution side, I already shared our plans for The Cinedigm Network and all that entails. Needless to say, my over 20-year background and experience in the film and television business gives me tremendous confidence in our alternative content strategy and I look forward to working with the exhibition community, studios and the talent and producing community to bring an array of exciting new content to our audiences.

In conclusion, I am pleased and proud of our fiscal 2011 operating and financial performance. Since I joined Cinedigm, I have been extremely impressed with the dedication and skills of our management team and, indeed, with the talent throughout our entire organization. I am confident that this team can deliver the growth strategy I have just described. As we develop and progress the opportunities are unlimited. As always, we appreciate your continued interest in Cinedigm. Thanks for your time and attention. And now we will be pleased to answer any questions you might have.

Thank you. (Operator Instructions) Our first question is from Eric Wold of Merriman Capital. Your line is open.

Good morning.

Hi, Eric.

A couple questions. One, first of all, with the environment out there for the small exhibitors needing to get digital really by the end of next year, next September, talk about the environment out there with them. Obviously, for the most part it's pretty much a convert or die environment if you don't go digital. So what is kind of maybe holding back some exhibitors out there from either coming to you or finding financing so that things wouldn't be maybe more accelerated than they even are now?

Eric, I think that generally there are -- everyone is very focused on the need to go digital and the timeline that we've outlined kind of towards the end of 2012. And I think the real analysis that now goes on for an exhibitor, especially some of the smaller ones, is whether they believe when they look at the financial of their business it merits the investment in going digital because it does have a cost to them. I think we have a very, very active pipeline.

At CinemaCon in early April our booth was never more crowded with people with questions. We announced 725 screens, I think, we signed that week. We had 1,400 signed in the quarter. We've announced almost another 400 signed in the last 45 days.

And as we said in the call, we are in deep negotiations with a number of exhibitors representing another 1,500 screens out of the 4,000-plus we are talking to frequently. I don't think there is any delay other than people evaluating the best way for them to approach it, to then finance it, and then make sure it's the right investment for them to make.

Yes, this is Chris. I think the statistics that Adam mentioned sort of speak for themselves. I think that the light bulb has finally gone off in the head of the collective body of exhibitors right now. John Fithian at CinemaCon, in his keynote address, announced that basically film was going away by 2013.

So, as you said, if the exhibitors don't convert now they die. So that's sort of the negative enticement for them to do it if you want to look at it that way, plus the VPF contracts aren't going to be issued after September of 2012. They also see the positive benefits.

Now that there are 18,000 screens that have been deployed out there, they are beginning to see the upside of digital cinema when they look to their left and right and see the exhibitors who have gone digital and the upside they are getting in terms of the software that they are able to employ and the alternative content that they are able to employ and the benefits of 3-D. So there are several factors that are really accelerating deployment going forward and I don't think there is a lot holding anybody back right now.

Perfect. And then, secondly, on alternative content, with most of the digital screens out there that have been converted, being used solely for 3-D, so from my understanding not a lot of excess digital screen that can be used for alternative content, at what point do we get, to pass that tipping point where exhibitors both have excess digital screen capacity, especially midweek, and content owners finally realize that is a way to make the investment to get their content onto those screens?

Eric, I think we are at that point. The key determinant is when an exhibitor converts their entire circuit or an entire complex, then there is no constraint on the ability to do different things with alternative content. When there were only a couple of screens in a complex for 3-D, the dynamic you describe was true.

And really over the last six or nine months as our rollout has accelerated, as DCIP's rollout of the Big Three has accelerated, you are getting to the point where an entire multiplex is converted. Then there is always availability for screens, hence, we see significant demand from exhibitors, hence we are forming The Cinedigm Network where they join in partnership with us and we have the ability to program those screens in off-peak times because that need is now there. So I think we are in the midst of all that happening.

And the last question, I apologize, (inaudible.) Besides the one-time CEO transition costs, anything else in Q4 SG&A that is unusual? Is that kind of a good base level going forward?

No, there is nothing else, I think, unusual in there other than that. I mean, it's a reasonable base level and any growth we see really is tied to new business, and a lot of that is really not in SG&A, it's down in the business units.

Perfect. Thank you, guys.

Thank you. (Operator Instructions) The next question is from Landon Barretto of Barretto Pacific. Your line is open.

Hi, Chris, good morning.

Hey, Landon.

Is there -- can you tell us more about The Cinedigm Network, please?

Yes, we think that it's really a unique network model that's going to give us a real competitive advantage out in the marketplace against others who are trying to get indie films or other forms of alternative content out there. What it is is it's a partnership between Cinedigm and exhibitors, where not only are we going to share in the box office revenues with exhibition, but we're also going to for the first time allow exhibition to share in the downstream revenues for any content whether it's indie film or other forms of alternative content that we debut on their screens.

And it's an acknowledgement, I think, of the role of theatrical release really plays in setting up the overall profitability of film and other types of content because that theatrical release dramatically increase the ancillary market potential of that content in VOD, in DVD and pay TV and in foreign sales. And we debuted the concept at CinemaCon a month and a half ago and the response from exhibition was overwhelmingly positive because, again, this is the first time any content provider or distributor has offered exhibition a piece of the downstream revenues on content.

And we are in the process of selling in the network concept right now and we hope to have some announcements in the next 30 to 60 days in terms of the exhibitors who we signed up to this model. And we -- again, we think that the beauty of it is it completely aligns the incentive structure and the objectives of exhibition and Cinedigm, the content distributor, for the first time and we think that is really going to be the foundation for a great economic partnership where everybody benefits down the road.

Okay. Thank you.

Thank you. Our next question is from Kris Tuttle of Research 2.0. Your line is open.

Hi, guys. Two questions. One, operational, which is just your expanding your investments in the software and development. Is that showing up in the R&D line, or will that show up in the R&D line? R&D is pretty low.

It shows up in both. I mean, we are adding both people who can maintain development so that expense shows up in the R&D line both on an amortization basis or a cash basis. And then, effectively, people who can service the customers, whether it's quality assurance and testing. Whether it's relationship management, new business development. So you get a split into both.

Okay. And on the content side, just to point to a recent example, this "Life in a Day" theatrical release that's coming up. This whole area of, I guess, what I would call sort of user generated content/unscripted, that seems like an interesting potential category for figuring out something which is going to bring people into the theaters on a recurring basis.

Can you expand on that? Am I off base there? Do you have any other views on how that might help soak up this kind of 80% capacity in the theaters at perhaps a much lower cost than having to actually get theatrically generated or theatrical quality content from majors?

Yes, I think you are absolutely right. I think there is a lot of upside potential in that whole category of user generated content. I mean, the important thing is not how much the content costs or whether it comes from a premier director or whatever. The key is that there is an added group that wants to see that content. And that's what you've kind of got with this whole YouTube crowd, and what we think we've captured lightning in the bottle with this "Life in a Day" release.

And I think the other important piece of it is that that's exactly the kind of content that you can add sort of an interactive piece to in theater, which we plan on doing with "Life in a Day" when we release it having had sort of an interactive questioning going on with the YouTube audience at the end of it. And I think that interactivity and that avid group out there are two elements that I think can make this successful. It's one of the content categories that we are looking at as we pursue what we talked about, this sort of programmatic channel approach, sort of the alternative content business.

We're going to try to select days during the month, Monday night is action sports night, and Tuesday could be your interactive YouTube night, and Wednesday could be your specialty film night. That kind of thing. So I think user generated content has a lot of really positive elements combined with the fact that it costs very, very little, so hopefully, be potentially one of the channels that we launch going forward and we were actively looking at that.

Okay. And when you say interactive, I mean, are theaters set up to actually have interactivity on-site during the film? Are you talking about interactivity in terms of selection and follow-up, things like that?

Well, technologically, once you've got the digital and we've put in various delivery mechanisms you can certainly do interactivity with Q&A where your audience is texting in questions. The question itself shows up on the screen. Chris asked so and so this or why that. So that kind of interactivity we do and have done that in the past. We did that in the Foo Fighters event. We've done that in a number of our Kidtoons events. We create that interactivity and that social experience in a different way.

I mean, you can certainly take it to the next level and actually have some filming and some participation of content in theaters. I mean, once you have the two-way network the creativity is limited only by the mind of the director or producer. And so I think that's part of what's intriguing to a number of people [as] we think about ways to create a differentiated experience in the theater is you can do things with people because you've got them all together in a social environment. They aren't sitting at home in their living room, which is fine, it's just a different experience which has always been the case with the theatrical releases.

All right. Okay. Thanks, guys.

Thanks, Kris.

Thank you, and I'm not showing any further questions at this time.

Okay, thank you very much.

Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.