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Digital Cinema Destinations (NASDAQ:DCIN)

Q1 2014 Earnings Conference Call

November 07, 2013, 16:30 PM ET

Executives

A. Dale 'Bud' Mayo - Chairman and CEO

Brian Pflug - CFO

Rob Rinderman - IR, JCIR

Analysts

Tristan Thomas - Sidoti & Company

Eric Wold - B. Riley & Company

James Goss - Barrington Research Associates, Inc.

Thomas Pfister - RedChip Companies

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Digital Cinema Destinations Corp. Fiscal 2014 First Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to Mr. Rob Rinderman from Digiplex's Investor Relations firm, JCIR. Please go ahead.

Rob Rinderman

Thanks very much, Kim. Good afternoon, everyone. Today's fiscal 2014 first quarter results conference call and webcast coverers the three-month period ended September 30, 2013. Today's presentation may contain forward-looking statements related to the company's future operating results. Such statements are based upon current expectations and assumptions and may involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These risks and uncertainties are detailed from time-to-time in our SEC filings.

Digiplex's actual performance may differ materially because of these or other factors as discussed in the Management's Discussion and Analysis section of our filings, copies of which can be obtained from the SEC or via digiplexdest.com. All information discussed is as of today, November 7, 2013 and the company undertakes no obligation to update any statements or expectations from prior conversations. Today's call is also being webcast live over the Internet and a replay will be available on our corporate website for a minimum of 30 days.

I'll now turn it over to Chairman and CEO, Bud Mayo, who is joined by CFO, Brian Pflug. Bud?

A. Dale 'Bud' Mayo

Thank you, Rob. We appreciate you all joining us this afternoon. At the conclusion of my opening remarks, Brian will provide additional color on Digiplex's fiscal Q1 financials and that will be followed by a live Q&A.

As outlined in DCIN's quarterly results announcement, we posted across the board improvements in key financial and per cap metrics during fiscal Q1. Brian will have more specifics on our performance for you in this section.

From a high level view, we're still in the early stages of building our planned national footprint of approximately 100 locations and 1,000 screens based in roughly 75 of the nation's top 100 designated markets.

At quarter end, our circuit consisted of 19 locations and 184 screens. The most recent addition was our July purchase of a multiplex in Torrington, Connecticut to go along with two other theaters that we have in Connecticut.

Value creation is ongoing as we further improve Digiplex's top line results by adding cash flow positive theaters into our expanding circuit, acquiring them at reasonable theater level cash flow multiples.

We continue to add locations with our JV partners, Start Media and at present approximately $10 million of dry powder remains on our original $20 million commitment from them in that JV to be clear.

Digiplex also recently raised equity capital, a $5.7 million oversubscribed registered direct common share offering in October with institutional investors from the company's $10.8 million shelf piling. A portion of the net proceeds will be deployed for our recently announced pending acquisitions, which are currently in the asset purchase agreement stage.

We signed agreements to acquire an aggregate of 37 screens at four new locations including a lease in the Daytona, Florida DMA that takes effect somewhere around April of 2014, possibly sooner. All are high quality modern entertainment complexes featuring fully digital projection systems and a full complement of 3D screens.

We expect closings over the next 90 days or so and with them, we'll reach – our circuit will reach a total 223 screens in 23 locations in nine states, an 111% screen growth rate since our IPO in April of just last year. A 223-screen footprint would also place us into the top 20 rankings of largest U.S. exhibitors, length by screen size. We anticipate further announcements before the end of this calendar year, each with its own approximate 90-day closing target.

Most of you on this call are webcast that are already familiar with Digiplex and heard me discuss our DigiNext Festival series. To briefly summarize, this joint venture which is different from our Start Media joint venture is now in its second successful season, capitalizing on Digiplex's unique capabilities to eventize quality alternative programs.

DigiNext's first year focused exclusively on documentaries covering an array of important issues and we released eight titles across our small but growing Digiplex circuit. To-date, we have generated modest but accretive ancillary downstream revenues.

And it's worth noting that Digiplex does not assume any material financial risk as our related marketing costs are already part of our ongoing G&A expense. That is there are staff already on our payroll and part of our team that markets alternative programming not just for product that we generate, but lots of others, literally hundreds every year.

What we bring to the table for a filmmaker is a theatrical distribution expertise in exchange for worldwide distribution rights to quality content. DigiNext season 2 kicked off with The United States of Football. We strategically timed its late August release to coincide with the tail end of the preseason and the start of the NFL regular season.

The United States of Football delves into the cumulative impact of repetitive head trauma in America's game from peewees to the pros. This is an important issue for parents, grandparents alike as evidenced by the league's recent multimillion dollar settlement with former players.

We're proud to report that with the help of Screenvision, this groundbreaking title played on more than a 130 U.S. screens making it one of the widest theatrical releases for a sports documentary of all time. This creates value for us downstream in distribution channels.

Coming up December 6 is a holiday theme theatrical title. After nine documentaries, DigiNext is shifting gears and releasing its first feature film called A Miracle in Spanish Harlem, a family-friendly movie that we believe will especially resonate with audiences as the Latino version of It's a Wonderful Life. This movie is also in the process of being booked by a large number of Screenvision affiliates, broadening its domestic theatrical release. We look forward also to a release in Latin America for this movie.

Speaking of alternative programming, in fiscal Q1 approximately 5% of the company's total admissions came from alternative programming, up from 3% in the prior quarter. As a reminder, we only count theaters that are on the Digiplex circuit for a year or more in this calculation due to the learning curve with educating audiences to expect this type of diverse product, the process of training theater level teams to help market alternative there and lastly, due to the time it takes to install the requisite digital technology platform software existence at our newer locations.

The top alternative programming contributors in fiscal Q1 were Kirk Cameron's Unstoppable, a live faith-based presentation; Springsteen & I, a documentary about the rock star's life and career through the eyes of his worldwide fan base and two popular Bollywood titles.

Let's take a quick look at how Hollywood movie slate performed during the quarter. Domestic industry box office receipts finished more than 6% ahead of year-ago levels backed by a well balanced and diversely. Interestingly, much of the positive year-over-year growth came not from the top 10 releases. On a comparative basis we're featuring the 10 highest grossing movies were basically flat during the September '13 quarter versus the '12 period.

Somewhat of a surprise, movies 11 through 20 significantly outperformed the comparable 2012 releases. Some of the outperformance should be attributed to several expected blockbusters which did not quite live up to the expected billing. The top 10 on the other hand included a few pleasant surprises such as Despicable Me 2 with over 360 million in box office receipts; We're the Millers; The Heat; and Lee Daniels' The Butler all outperformed prior expectations.

In the current quarter, Gravity especially the impressive 3D take rate has raised a lot of eyebrows around Hollywood and among exhibitors alike. I also want to highlight a few upcoming high profile December quarter releases that we expect to dominate this coming holiday season. The most notable ones include three two-part sequels of a trio of popular debut films; Thor, Hunger Games and The Hobbit.

Before turning it over to Brian, I would like to provide a quick summary of where Digiplex is today and where we're headed? We're on a rapid growth trajectory with lots of runway for further expansion ahead. Our senior corporate and theater level teams have learned a lot since beginning our operations in just early 2011 and completing our IPO in 2012. Circuit growth has been significant but a bit lumpy which we cautioned you to expect with same path [ph] going forward as M&A timing is often unpredictable.

We remained disciplined and stick to our strict acquisition criteria. In other words we're not going to just bulk up for the sake of continuing a growth pace. Our footprint has been built from day one on a digital platform, one of our core competencies. We're working each and every day to capitalize on and take advantage of this which we believe is both a competitive and a strategic advantage to us. The exhibition industry is clearly undergoing domestic consolidation following a disruptive technology shift and we expect Digiplex to remain at the forefront of this long-term trend.

There are about 40,000 cinema screens across the country today and about one-third of that total is made up of possible targets from which we were seeking fewer than 800 screens to add to our national footprint. As discussed on prior calls, many family-owned exhibitors are finding it increasingly challenging to compete in today's new digital environment and we're in various stages of negotiations with a wide variety of theater owners and landlords in and around major markets in the United States.

In closing our ultimate goal is a national footprint comprised of accretive additions of cash positive locations where we can improve theater level and adjusted EBITDA metrics. With the organization seasoned senior management team already place, we expect the larger percentage of incremental theater level cash flow to enhance our corporate EBITDA line as we continue to expand the Digiplex circuit, benefiting our stakeholders along the way.

That concludes my remarks. Brian will now discuss our financials. Brian?

Brian Pflug

Thanks, Bud. Good afternoon, everybody. Digiplex's fiscal Q1 includes a full quarter of operating results from the vast majority of our circuit, the only exception being our addition in mid July of a theater in Torrington, Connecticut. As of September 30, our full circuit consisted of 19 theaters and 184 screens in six states.

Our 3D capable footprint is approximately 35% of the total screens. We have one IMAX premium large format auditorium at our Surprise Pointe 14 in Arizona, D-Box 4D seating at six locations and ButtKicker 4D in our Solon theater.

Digiplex's comparable fiscal Q1 2013 financials include contributions from 73 screens including the original 19 in New Jersey and Connecticut and the Cinema Centers theaters based in Pennsylvania. The comparable period also includes a two-day stub period of operating performance from the Lisbon 12-plex which was integrated into our circuit in late September 2012.

For the three months ended September 30, 2013, total revenues were 11.5 million including admission revenues of 7.8 million, concession sales of 3.3 million and the balance from other revenues which is mostly advertising and rental revenue. Our current circuit is generating a top line annual run rate in the mid to upper $40 million range and we obviously expect that level to rise further as we grow our footprint.

As Bud mentioned earlier, we have several of asset purchase agreements that are pending on additional locations with expected closings later in the current quarter and a lease for another for which we will take occupancy in spring 2014. Our box office per patron grew to $7.59 this quarter, up from $7.17 last year. This was positively impacted by our entry into more favorable demographic areas and our continued focus on premium priced alternative content options.

Film rent expense for the September quarter was 3.8 million or 48.7% of admission revenues versus 47.3% last year. As a reminder this percentage includes the benefit of virtual print fees or VPFs for screens where we both own and funded digital projection systems. The uptick was primarily due to a lower percentage of our screens that received VPFs and the mix of products shown. In aggregate our film rent will be impacted by our percentage of total screens that receive VPFs as well as the mix of Hollywood, independent and alternative programming.

Cost of concessions in fiscal Q1 represented 18% of concession revenues versus 14% in fiscal 2013. The change in our gross margin was partially a function of discounts and promotions impeding our non-core items. We are presently revisiting our pricing at certain concession items including combos. Over the long run we expect Digiplex's gross margin on concessions to average somewhere around 85%. However, this percentage may fluctuate due to a number of factors such as product mix, material changes in supply pricing and seasonality.

Having said this, our bottom line contribution from concessions has increased because concessions per patron were again a bright spot for us, rising 13.5% to $3.27 up from the $2.88 level in the prior year period. Fiscal Q1 is the third consecutive quarter in which we achieved double-digit year-over-year increases in the key concessions per cap metric. We attribute part of the growth in fiscal Q1 concessions per cap to a film slate with several family-friendly titles which tend to have higher concession sales and early success of a few of Digiplex's concession strategies which we continue to tweak.

G&A costs amounted to 1.3 million including nearly 300,000 of non-cash stock-based compensation expense and M&A related costs. Also, Digiplex earned nearly 300,000 of management fees in the quarter which reduce our G&A. However, for SEC reporting purposes are not shown since we fully consolidate the JV owned theaters. However, we account for this in our adjusted EBITDA calculations. For those modeling us, you should expect to see some level of M&A related expenses each period as we continue to expand our circuit.

As we continue to grow and achieve economies of scale and with our experienced senior team all in place, the company's G&A costs should continue to decline as a percentage of overall revenue. Fiscal Q1 depreciation and amortization expenses were 1.3 million which exceeds the amount of our operating loss in fact, and with our ongoing M&A strategy, this will trend higher proportionally. These non-cash charges are benefiting the company by adding to our tax net operating loss carry-forwards which total approximately 5 million at this time shielding us from cash income tax into the future.

Interest expense on the company's 10 million of notes outstanding was 427,000, which includes a non-cash component that totaled 76,000. We are in a process of seeking alternative and expanded debt financing to further improve our net cash flows while allowing for future growth.

The quarterly operating loss amounted to 929,000 and our net loss was 1.4 million or $0.16 per diluted share based on approximately 6.5 weighted average diluted shares outstanding. Share count will rise in the next quarter's reporting due to our completion of the registered direct offering of the 1.14 million common shares.

Taking a look at two key non-GAAP measures, theater level cash flow was 1.8 million and adjusted EBITDA was 1.0 million versus last year's theater level cash flow of 1.0 million and last year's adjusted EBITDA of 358,000. These increases are 81% and 181%, respectively, demonstrate the accretive impact of our acquisitions. This marks our first quarter where adjusted EBITDA has surpassed the 1 million mark and the second quarter where attendance has been 1 million patrons.

Also, our average attendance per screen has increased to 5,893 up from 5,690. We expect continued improvements in these metrics as we leverage G&A expenses, further enhance operating efficiency, cultivate new earning screens and improve upon our social media and marketing outreach initiatives. You can find reconciliations to Digiplex's reported GAAP results in today's announcement.

This concludes our prepared remarks. Operator, you can open the lines for questions now.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from the line of Tristan Thomas with Sidoti & Company. Please go ahead.

Tristan Thomas - Sidoti & Company

Two really quick questions. I know the year-over-year comparison for both the average ticket price, the first and average concession price per person increased year-over-year but it's actually down from the previous quarter. Could you speak to that a little bit?

A. Dale 'Bud' Mayo

Sorry, Tristan, you're asking about concession forecast did I hear.

Tristan Thomas - Sidoti & Company

Yes, concessions and then also the – I'm sorry the average admission per patron? It's up from last quarter 7.92 average admission per patron and then I'm also showing 3.45 in terms of average concessions?

A. Dale 'Bud' Mayo

That's purely a function of the type of movies and the kids being home from school during a good part of this quarter. That will always influence prices. Kids' prices are significantly lower. And it's really the mix of all of these. So it's better at least from our point of view to compare how we did doing the comparable period in the prior year and to measure those and is close to a period by period and the nature of the demographics who are coming into the theater are really influenced by the product and also whether the kids are home from school.

Tristan Thomas - Sidoti & Company

Okay. Perfect, it makes sense. Thanks, guys.

Operator

Our next question comes from the line of Eric Wold with B. Riley & Company. Please go ahead.

Eric Wold - B. Riley & Company

Thank you. Good afternoon. Two questions. I guess one, in the press release for the theaters to lay out [ph] the first agreement in October as well as the one today, financial terms weren't disclosed. I understand that you want to obviously be a little considerate to the sellers there. But can you maybe give a sense of what the aggregate combined purchase would be for all three combined, so maybe not single out individually?

A. Dale 'Bud' Mayo

Two things from flagship, we did file an 8-K announcing the purchase price for those with the asset purchase agreements attached. So we can tell you that those two theaters will have a purchase price of $4 million.

Eric Wold - B. Riley & Company

Okay. And how about the one today?

A. Dale 'Bud' Mayo

The one today it's about 2.5 million we'll be filing.

Brian Pflug

Yes, we'll be filing that under an 8-K probably Monday.

A. Dale 'Bud' Mayo

All of our acquisitions are designed to be in that framework of five to six times cash flow and these are consistent with that. You'll find that in the filing where we have filed more details, the $4 million price consists of accommodation of stock and cash off our balance sheet and those are two acquisitions that are being made directly by Digiplex and not in the joint venture. The lease in Florida is done in the joint venture and that involves a relatively normal investment on our part and a fairly substantial one from the landlord to refit the theater sometime in the first quarter we expect, April is target. And then the ones that we announced today, I don't want to get into too much detail because we haven't filed anything publicly but I've already given you a framework and a purchase price. This is a theater we're buying – the second one we've bought from the O'Neil family and we're very pleased with the results of the first. They've outperformed for us and actually have earned a contingent payment that we're making in the next couple of weeks and this is kind of a very similar theater, smaller in some respects but a very good theater that we're looking forward to and entering – first entry into the Boston DMA.

Eric Wold - B. Riley & Company

Okay. And then you kind of touched on the second question a little bit, I know that the Star Media JV has kind of a first right to determine if they want to bring you theaters into or not. What's kind of the decision process there and as to why the lease obviously connects your going in and three other ones are not. What was the determining factor of why those are not put in the JV?

A. Dale 'Bud' Mayo

Basically, we needn't confer on every acquisition that we look at and the nature of our relationship is a business one as opposed to an investor issuer. So there are a lot of things we talk about including the pipeline. So we have roughly $10 million left of dry powder in there and there are some theaters that we're looking at that are all cash deals and that have a particular orientation toward doing in the JV, so without getting into that detail because we do have a pipeline as you know and there will be more announcements we expect between now and the end of the year. In fact we hope many. So a lot of it is just looking at what's the best use of capital and where the strategic locations should be. One of the two theaters, for example, that are in the flagship group is a theater that's pretty close to one of our existing theaters at Camp Hill. So that wouldn't have gone to the JV anyway. The one outside of Baltimore could it conceivably gone there, but we think there are better ways to use the remaining dry powder in the JV and expect that we'll be doing that hopefully in the not too distant future.

Eric Wold - B. Riley & Company

Okay. Thank you, guys.

Operator

The next question comes from the line of Jim Goss with Barrington Research. Please go ahead.

James Goss - Barrington Research Associates, Inc.

Hi, Bud. Hi, Brian.

A. Dale 'Bud' Mayo

Hi, Jim.

Brian Pflug

Hi, Jim.

James Goss - Barrington Research Associates, Inc.

I want to follow-up first with a little bit of the first question about the admission price per patron. While the concession per patron has shown a good progression over the last few years, the admission price is above last year below the year before that and I just wanted to – if one or the other was an aberration or what you should expect and just do it on the same quarterly basis?

A. Dale 'Bud' Mayo

Yes, that sort of depends upon where the theaters were over the last three years, Jim, and two years ago we were just in New Jersey and Connecticut where prices are high. Then last year we had a big mix in Pennsylvania – in the central part of Pennsylvania where box office prices are lower. And now this year we're there and on both coasts even more so especially in the California, San Diego area where prices are a little bit higher again. So I think that's still a track.

James Goss - Barrington Research Associates, Inc.

Okay, that's a good explanation. I was also wondering to the extent that alternative programming as you increase that doesn't necessarily carry the same pricing as traditional norms. Will they be counted in the same admissions per cap number or will you tend to try to separate them out somehow at least once they become increasingly meaningful?

A. Dale 'Bud' Mayo

Well, internally we do. We have not been adding a line item with that kind of details as of yet but I can tell you that in the quarter, the only thing we have shared publicly is that the average – we shared of course the percentage of our admissions. But another important metric at least to us and I think probably to you as well is that our experience in terms of the multiple business we're doing with alternative programming in the time slots that we're replacing that is the low grossing feature. In the quarter it was 8.7 times what we did on average in our circuits. And going back including the entire circuit, it naturally wasn't that much lower even though we're not counting – we just brought onboard in the past year. As we acquire theaters we give them a year to ramp up and then we start counting the percentage of admissions. But even with that we're having good success with our alternative program.

Brian Pflug

Jim, I think you were asking if the alternative programming revenue and attendance is in that per cap number and the answer is yes.

James Goss - Barrington Research Associates, Inc.

Okay. I might also ask if The United States of Football conservative is a bit of a case study for us to just look at how an early stage version of proprietary alternative content would have value either financially in terms of – at a box office downstream values, whatever, as well as alerting your client base that you're going to do these sort of things periodically. Is there something you can talk about in terms of whatever financials or others you did get out of that particular issue?

A. Dale 'Bud' Mayo

At this stage we're not sharing that information, Jim. It's not material, not even remotely material. We're making money on each feature that we release. I'm hopeful that the movie that we're releasing on December 6 which is our first feature film may have different metrics than we've experienced with the documentaries we've done in theaters. But we are – and particularly with The United States of Football with the attention that it's gotten. We won't be talking about output and DVD and digital channels for another two or three weeks with a variety of sources. That's where in documentaries that's where the money is and we're not there yet with any of our documentaries, so we're just beginning that process. A feature film is a little different and we do expect that the box office for A Miracle in Spanish Harlem which we're pretty optimistic about for a little movie just to be clear, a little movie with some bright spots and some real attention and wonderful reception by exhibitors [indiscernible] when we showed the footage. So I'd rather not get into these numbers specifically because they're not meaningful. If they were, believe me I'd be happy to share them. But what we're doing culturally and I think the second part of your question was what does it mean to us? It means a lot. It means that we're able to take a marketing organization that's a very powerful one that's used to market too for the opera and the ballet and rock and roll and Springsteen & I and Unstoppable and all the alternative programming that we do every week, we're getting really good at that and we're able to take that same team and insert them into creating not only a marketing approach to our own theaters which we do easily and readily, but creating what we call marketing in a box that we're able to get to Screenvision and to other circuits around the country and even in Latin America and provide them with some of the tools they need to be able to reach their audiences and possibly create value for the product that we're putting out on these domestic screens, and potentially in this case Latin American screens. That's the value creation. It's a combination of yes, we'd love to see – make a few hundred thousand or maybe make a million dollars on a movie, but what we're doing is building up to that. And even though I talk about DigiNext a lot and I can talk about our interest in content, we do that because it's an interesting part of our story, it's a huge vertical for us and differentiates us but until it becomes significant or we have an experience that is specific and we can make a case study of it, we'd be happy to share that but it's not there yet. And maybe in the next quarter we can talk a little bit more about this.

James Goss - Barrington Research Associates, Inc.

And the last thing I'd ask is do you have an opportunity to distribute beyond your own platform your future film? And if so, do you have somebody who would handle that for you because I don't think you're a distributor really?

A. Dale 'Bud' Mayo

We had distribution capabilities a lot more than you might expect, but Screenvision roll here and our relationship with Screenvision that I know you're aware of. They're the guys who leverage our own in-house capabilities both here at Digiplex that I described earlier, our marketing team, our marketing in the box. And now we have the benefit of Screenvision's back office capabilities as well as their booking and relationship capabilities. So A Miracle in Spanish Harlem I would anticipate would go to more screens than The United States of Football and I think that our revenue per screen will be higher because it is a feature film and because it's really a very targeted feature film to an underserved Latino marketplace.

James Goss - Barrington Research Associates, Inc.

All right. Thanks so much.

A. Dale 'Bud' Mayo

Thank you.

Operator

(Operator Instructions). Our next question comes from the line of Thomas Pfister with RedChip Companies. Please go ahead.

Thomas Pfister - RedChip Companies

Hi, guys. Congratulations on the good quarter again.

A. Dale 'Bud' Mayo

Thank you.

Thomas Pfister - RedChip Companies

My first question here is how are you guys looking at – what's your target did you guys think for your capital structure, like your long-term debt to equity?

A. Dale 'Bud' Mayo

Debt to equity 1 to 1 is our ultimate goal. Obviously we're not there. We have about 10 million of debt, net debt of much less than that since we have a pretty good cash position following our equity raise. And we have about 31 million of invested capital since inception. So we certainly like to see us getting closer to that. We're not in a huge rush to get there, but that's a very important initiative right now for us. We're preparing and have begun talking to banks. We're not ready for the major banks right now. That seems clear but the regionals have shown interest and hitting that 1 to 1 ratio is our ultimate goal.

Thomas Pfister - RedChip Companies

Okay, great. Thanks for the color there. Just one more question from me. So the acquisition that you just announced today here was from an operator that you had already made a previous acquisition from. Going forward is there something that we should see a lot more of – you guys going back to previous operators that you already acquired some theaters from?

A. Dale 'Bud' Mayo

Absolutely. We have great relationships with the exhibition community going back 15 or 20 years. Our management team [Technical Difficulty] those relationships are meaningful to both of us and that has served us well and as well as the sellers. And so another case and point is that our lease in Florida, it's the Daytona market, is the same landlord who we have in our Connecticut outside of Hartford theater who called us to invite us to negotiate a lease on that 12-plex. There are several conversations just like that going on right now and we like them because we're known quantities, we have already negotiated lease terms and/or asset purchase agreement terms. We have the template in place. It's makes it a lot easier for both parties and a lot less time consuming. We've shifted our gears toward making those kinds of deals and that's one of the reasons that things have picked up recently and we'll continue to – we've gone back to playing what we'll call small ball and willing to do a deal at a time, a theater at a time to build our circuit while we keep our eyes and ears open. Hopefully create a bank line of credit, strength our market cap and be able to look at larger deals as well in the coming year.

Thomas Pfister - RedChip Companies

Okay. Then just a quick follow-up from me on that. I'm not looking to put any words in you guys mouth or anything but if you're going back to some operators that you already have with these relationships, should we maybe think there might be a little bit of a decline in some of those one-time merger and acquisition costs just relative to on like a per screen basis?

A. Dale 'Bud' Mayo

Yes, for a number of reasons but one of them is that we do more in-house and because we have in-house council and legal assistance on the payroll, those are not taken out of our EBITDA because they are payroll, they're SG&A costs. So you'll see third party costs coming down a bit and particular when we do deals with people who we've done business with before. But we still have confirmatory due diligence that we have to do on each of these theaters. They include physical, accounting and legal and some of that is outside legal. And if it's outside of our circuit [ph], geographically we may hire local council to help us with our due diligence. So yes, I think they'll come down a bit on a per quarter basis certainly in relation to total revenues. But frankly that's what drives us right now is the continuing daily effort to make deals and to make good deals and acquisitions. So I don't know that it's particularly a good thing if M&A costs go down in a quarter, because it may suggest to some that we're not as busy as we are. Our job right now is to hit 1,000 screens in the next few years, the sooner the better, and do them accretively. And to do that we have to spend some money.

Thomas Pfister - RedChip Companies

Okay, great. Thanks for the color there. That's all the questions I have for today. And I'll just say, keep up the good work guys.

A. Dale 'Bud' Mayo

Thank you.

Operator

There are no further questions at this time. I'll now turn the call back over to you for closing remarks.

A. Dale 'Bud' Mayo

Well, first of all thank you all for joining us today. We look forward to individual conversations from time to time and welcome our new team of institutional investors as well as many of you who are just hearing the story for the first time. Thank you very much and have a wonderful rest of the day.

Operator

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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