Greetings, and welcome to the Moving iMage Technologies First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel, Senior Managing Director. Thank you, sir. You may begin.

Thank you, operator. Good morning, and welcome to Moving iMage Technologies earnings conference call webcast. With me today is Chairman and CEO, Phil Rafnson, who will provide an industry overview, Co-Founder, Executive VP of Sales and Marketing, Joe Delgado, who will provide a strategy and business overview and our CFO, Bill Greene. For those of you that have not seen today's release, it is available on the Investors section of our website. Before beginning, I would like to remind everyone that except for historical information, the matters discussed in this presentation are forward-looking statements that involve several risks and uncertainties. Words like believe, expect, anticipate, mean that these are our best estimates as of this writing, but that there can be no assurances of expected or anticipated results or events will actually take place. Actual future results could differ materially from those statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the SEC. Now I'd like to turn the call over to Phil. Take it away.

Thank you, Brian, and thank you all for joining us today. I'm Phil Rafnson, CEO of Moving iMage Technologies, or MIT. As you look at MIT as an investment industry and company-specific factors will contribute to our future performance. First, I'll address the cinema industry as it stands today. And then Joe will discuss why we are so excited about the future, where we are introducing potentially disruptive technologies into cinema, eSports, stadiums, arenas and other live entertainment venues. Historically, our business has been cyclical driven by new technology and technology upgrade cycles. We are currently in the early days of one right now where newer technologies such as laser projectors with upgraded servers, new screens and smart sound systems are being purchased to replace older technologies. Additionally, we are seeing cinema owners build new theaters and upgrade and refurbish older ones. These new theaters often include new amenities such as dine-in, bars and more, all with the idea of making going to the movies a destination experience. From an industry growth standpoint, as I've discussed previously on these calls, COVID took a toll on the industry. Over the past two years, we have returned to a more normalized environment with the box office originally expected to approach pre-pandemic levels this year. Unfortunately, the Hollywood strikes have negatively impacted the box office over the near term, but theater owners are pivoting to new movie content, whether it be sports, eSports or concerts to offset some of the lost revenue. An example is AMC partnering with Taylor Swift to show her concerts in the theaters. While this alternative content helps, it doesn't fully make up for the lost box office and concession revenue during the holiday season for our customers. Additionally, now that the actor strike is over, we expect the studios to move ahead aggressively with marketing, releasing new movies. Before returning the call over to Joe, I'd like to thank our dedicated employees. Without them, we would not be in what I believe is the strongest position we've ever been in as a company from an operational, financial product and competitive perspective. Thank you, Joe.

Thank you, Phil, and good morning, everyone. I'll start by briefly reviewing our business and providing updates on each area. Today, Cinema is our core legacy business, which consists of FF&E projects and selling our proprietary U.S. manufactured goods and third-party technologies. As Phil mentioned, this part of our business has historically been more cyclical and lumpy with project start dates often being pushed out. Additionally, FF&E projects tend to be at the low end of our gross margin profile, although there is strong operating leverage in this part of our business. Today, FF&E remains the largest part of our business. However, given the lower margin profile, lumpiness and timing factors I just mentioned, a major part of our strategy going forward is to shift our mix towards higher-margin products as well as smooth out the lumpiness and cyclicality. For Cinema, this includes expanding our existing lineup of over 50 proprietary manufactured products, including our ADA compliance products and Caddy lines, the former of which was a contributor to our strong first quarter results. By manufacturing these products, we can significantly increase our margins on FF&E projects and our overall company gross margin when sold a la carte. Additionally, our partnership with LEA professional for smart power amplifiers is another potential source of growth and margin expansion for both FF&E projects and core sales. After the end of the quarter, we announced our first two orders for these products, and we currently have several large circuits in test. We're confident in this relationship because each screen needs 5 to 6 power amplifiers on average, and LEA is so confident in its product quality, its warranty is 2 times the industry standard. Between the quality at LEA and supply chain and quality issues at their competitors, which are also deemphasizing the…

Thanks, Joe, and thank you, everyone, for attending our earnings call. I'm going to spend a little time reviewing our model, and then I'll take you through the quarter, followed by Q&A. To date, our legacy FF&E projects have been the key driver for our business, making up roughly 60% to 65% of revenue. As Joe and Phil mentioned, FF&E projects are more cyclical and can often see start dates pushed out as we saw in FY'23. We serve as a project manager procuring and reselling FF&E and services for refurbishing, upgrading and building new theaters. As a large part of these projects involve pass-through costs with a small margin added in, project margins are in the mid-teens. We have several routes to improve these margins, including upselling installation services scoping our proprietary manufactured products into the project for the retail clear margin technology products, including projectors and servers and more recently founded some products through our relationship with LEA Professional. Next, we sell our higher-margin proprietary manufactured offerings, a la carte, which have margins ranging from 35% to 55% and include our fabrication, Caddy and ADA compliance products. Additionally, since we are in the early days of a multiyear technology upgrade cycle, we received discrete orders for servers, projectors and LEA power ramps once, all of which have gross margins above the company average. In the near future as our emerging products like MI translator, CineQC hit the market and start to scale, we expect our mix to shift even more significantly away from FF&E, these products will likely have 50% plus gross margins. Now moving to our first quarter results. We reported revenue of $6.6 million, up 13% versus last year. Gross profit increased 17% to $1.8 million. Gross margin was up 80 basis points to 27.4% in…

[Operator Instructions] Our first question comes from the line of Neil Fegans a Private Investor. Please proceed with your question.

First of all, it's great to see the nice performance of the core business, and you covered a lot of ground on the $45 early-stage new initiatives. And I wanted to see if I could just drill down a little bit more on a couple of them. For the benefit of me and I think others, could you review what our contractual relationship terms are with SNDBX in terms of what the 2 or 3 primary elements of that agreement are and what our equity ownership interest in them is right now based on their current capital structure?

With respect to SNDBX, the equity position I think Brian can probably share a little bit more about this in detail. But I think we assume something like 6% of equity and it depends on where we're going to land with respect to their first round of funding. And what we did aside from supplying the technology, we have that exclusive supplier agreement in place. And I believe that is a 3-year exclusive supplier agreement.

And that's for the eCaddy. And is the revenue per -- to us, still around 43,000?

Yes.

So yes, it's a multimillion-dollar exclusive supply agreement. There's technology sharing and ownership as part of that. And yes, generally, we're talking $40,000 to $50,000 per system. Okay. And are you all -- Phil and Joe, are you guys considering taking a piece of this current round. I believe you have a first right of refusal on all of their future financings, if I'm not mistaken.

Yes. You broke up at the beginning of that question. Neil, I'm sorry.

I was asking if you're planning to participate in this next financing round? Yes. We're not going to comment on that. It's -- the round is still ongoing and it's just not something we're going to comment on at this point. Let me ask another quick one here. Is there any visibility on potentially landing any large sports arenas, either new builds or refresh. That really hasn't been part of the conversation since I became interested in the company. But is there any visibility probably more likely on some of the large stadiums refreshing and needing sizable dollar amounts of your Caddy product lines?

Yes. This is a brand new technology, nothing like this release this.

Yes. I'm not talking about e-Caddy. I'm talking about just the Caddy line as it exists today, the legacy.

Yes, there is existing -- we're looking at existing pipeline now for sure. We work closely with the major seating companies Neil, like e-Caddy and Irwin seating out of Michigan. So yes, there's new builds and remodels going on in arenas and stadiums now. However, that has lagged. I think we've mentioned in prior calls that has definitely lagged behind like our core business, cinema, but it is now starting to pick up.

And Joe, would you say the likelihood of landing one or more of those opportunities is likely in 2024? Or is there just not good enough visibility to go that to say that yet.

I think we've got a couple of really good candidates that should land this fiscal.

And listen, one more quick one. How should we be thinking about e-Caddy, the next generation of the Caddy product? Should we be thinking more likely revenue generation in 2025? Or are you thinking that it's still possible that we could start to have that product formalized, finalized and ready to go to market and generating sales late this year.

What I'll say about that, Neil, is the excitement level for us here at the company is tremendous because of the feedback that we've got. And I think we're going to be very, very judicious with respect to our approach to market, we're going to get our ducks in a row. And basically, it's all about voice of the customer, right? We're getting into a space that has never existed. So we want to make sure that we come into the market with a product and service that is both robust and flexible enough to meet the customers needs at the arena and stadium level, the operational level. And of course, from a revenue standpoint, it's got to bring value to both sides, right, us and the arena and stadium operator. I think we're well on our way to doing that.

Okay. And…

Just to build on that, I would probably be looking to fiscal 2024 development year. We're still talking to some stadiums this month. And from that, we'll be able to go out and start to develop the road map and the actual service that will be provided. So I probably wouldn't look to any business this year. And if the device some business, that would be, again, another category of upside. But I would look at it as sometime next year and beyond.

Well, listen, I'll yield the floor here. And I just would like to reiterate, great-looking core numbers. You guys are basically trading only $0.15, $0.20 above cash and you're profitable. So hopefully, an active IR program to get out and increased visibility. But thanks again, and I'll leave the floor.

Ladies and gentlemen, that does conclude our question-and-answer session. And with that, the conclusion of today's call. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Thanks, everybody.