Access Integrated Technologies, Inc. (AIXD-NASDAQ)
October 31, 2008 Issue
The Most Powerful Name In Corporate News and Information.
Access Integrated Technologies Is Focused On Exploiting Their Leadership Position In Converting Film To Digital Cinemas Throughout The United States As Well As Globally
Bud Mayo, Chairman,
Co-Founder, Chairman, President and
CEOCFO: What is involved in doing the conversion to digital?
“First of all we have agreements with hardware suppliers. There are various
components to the architecture that we have created. These include a digital
projector and media server. Our unique Library Management Server® is the
center or core of the installation and consists of components assembled for
us. Think of the Multiplex movie theater as a local area network where there
is a central server connected to a satellite dish so that you have a single
point of ingest with deliveries for all kinds of content and a place to
store all of that content in digital form. Then distribute out to the
various auditoriums where there is a media server, which has a small amount
of storage, and a studio approved digital projector. Movies play out on a
screen in a crystal-clear manner that does not deteriorate along with crisp
sound and automation that follows. Everything can be set up from the
manager’s office using the Library Management Server, which houses our
Theatre Command Center® software or “TCC”. Like an iPod, a play list can be
created to automate when the lights go down and come up throughout the
entire week. The operators determine what version, what movie, and what
particular type of content will appear on which screen at what time. Using
the software managers will set up a schedule for each play list, which
includes when the movie will start, what time the trailers will start, and
what time advertising begins and ends.
is this economic climate affecting the people that are purchasing your
CEOCFO: What do you do that is better? What is the competitive edge causing customers to choose AccessIT?
Mr. Mayo: “What we do is we do it, we don’t just talk about it. We have all of the parts, all of the technical expertise, all of the products and services that are needed to have successful conversions. No other company on the planet has that combination of talents. In addition, we have the ability to offer alternative content. We have a continuing stream of alternative content, such as concerts, and G-rated cartoons aimed at very young children, with a child psychologist giving an analysis of what is in these programs. Examples are Care Bears, My Little Pony, Thomas the Tank Engine, and Sesame Street characters. We have sports events live and will be doing more of these in the future, some in 3-D. We do all of these things and we manage that whole process on a fully integrated basis. It is a complex story for sure and certainly, it is misunderstood and undervalued in our opinion. We understand that there are plenty of undervalued microcaps out there. We happen to be one and the one we know about most. We know we are misunderstood because of our complex debt structure, which is backed by long-term contracts that are in place before we incur that debt and it is backed by assets, and the long-term contracts are with major credits. Even though the debt is on our books at first glance it looks like a lot of debt, but when you understand the revenue streams of the company of those assets, you get more comfortable quickly with the fact that we have a sizeable investment in those assets and excess cash flow.”
CEOCFO: Are theater owners looking for that additional content or do they need to be educated on how they can make it work for them?
Mr. Mayo: “At this point they are looking for it very actively. A year or two ago that would not have been the case. The industry has been educated from all the conversations around the industry at all the major conferences; it is all about digital cinema. What we noticed a few years ago is it was about understanding what digital cinema was, technology, cost, and what the pitfalls were. Now it is about what do you do with it once you have it, and how do you make it work for you. We have been saying this for years, that digital cinema is not about technology even though we are a technology company. It is about content, choices, and what you do with it that really makes a difference. We certainly know studios and distributors will save a lot of money on prints. That is their motivation, but it is also about staying in a digital format from beginning to end right through post production, DVD, high definition, pay-per-view, all of which are digital. The only stop in the chain of distribution has been film in theaters and once that changes it is going to be seamless and a lot easier to control piracy and have a much more highly secure information that will not been accessible as readily to pirates as film is.”
CEOCFO: Would you tell us about the global component?
Mr. Mayo: “The global component is absolutely there. There are 107,000 screens worldwide, 37,000 of them in the US. The issue is that it is a very fragmented market. There is no United States market anywhere else in the world, except maybe India, which has its own industry and isn’t following the Hollywood standards. Everywhere else in the world you have anywhere from a couple hundred theaters to maybe a couple thousand and that presents its own problems because each one of these countries has its own currency, laws, business rules and players, people in the business that influence business in the country. Not every movie that is played in China or France or Italy or even Australia comes from Hollywood. That means that the local distributors have to be a part of this as well. What we decided as a company that on international we will work with partners in each country that we feel are financially sound, knowledgeable and solid, and provide our technology, provide our expertise and help in a joint venture mode. Our mantra outside of the US is that we will sign the backs of checks not the fronts of checks.”
CEOCFO: What do you see two or three years down the road?
Mr. Mayo: “I see a company doing between $350 to $400 million a year, and the software type margins in excess of 60% on an EBITDA level.
CEOCFO: In closing, why should potential investors look at Access Integrated Technologies today?
should be looking for the growth of the digital cinema universe throughout
the world because that is the gating issue for AccessIT. Whether we install
the systems in our own Phase II or some joint venture outside of the US, or
we help another provider or just stand by while others install systems, we
feed off of that digital platform: we sell more content, we sell software,
we deliver to those systems every time they play a movie or any other
content as a delivery agent just like FedEx or DHL. We have satellite
dishes, we have the only electronic system for delivering movies, and we
also can deliver by hard-drive when we have to. Our growth is tied to the
growth of digital cinema; we are the only company that is pure-play in
digital cinema and we are a beneficiary of the worldwide growth. Any
expansion of that universe from only a few thousand screens now to
ultimately 107 thousand screens over the next three to five years, will have
a direct impact on our ability to grow. We fully expect to continue to
benefit from that.”
“Our vision is to exploit the leadership that we created over the last three years in digital cinema enabling every part of the motion picture industry to convert from film to digital. Our vision is to continue doing that through advances in our own technology and through the work internationally with partners in various countries while we continue to do the conversions here in the US.” - Bud Mayo
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