Premier Exhibitions' CEO Discusses F3Q 2014 Results - Earnings Call Transcript

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 |  About: Premier Exhibitions, Inc. (PRXI)
by: SA Transcripts

Premier Exhibitions Inc. (NASDAQ:PRXI)

F3Q 2014 Results Earnings Call

January 13, 2014 5:30 PM ET

Executives

Sam Weiser - President and CEO

Michael Little - Chief Financial Officer

Analysts

Brian Murphy - Merriman Capital

Andrew Shapiro - Lawndale Capital Management

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Spencer Green - Lawndale Capital Management

Jason Stankowski - Clayton

Operator

Good afternoon. And welcome to the Premier Exhibitions’ Third Quarter Fiscal Year 2014 Earnings Call. Today’s conference is being recorded.

I would like to remind everyone that the company will be making forward-looking statements on today’s call. These forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties, and are not guarantees of future performance.

Undue reliance should not be placed upon them as actual results may differ materially. Please refer to the risk factors identified in the company’s filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on the company’s operating results, performance and financial condition.

And now, I’d like to turn the conference over to Mr. Sam Weiser, Chief Executive Officer and President of Premier Exhibitions Incorporated. Please go ahead, sir.

Sam Weiser

Thank you, Operator, and good afternoon, everyone. Before we begin, I would like to remind you that in today’s call, we will discuss adjusted EBITDA, which is a non-GAAP financial measure that our company uses as a key metric for evaluating performance internally.

Adjusted EBITDA also provides investors with additional information to facilitate the comparison of past and present performance, and in explanation and reconciliation table to the nearest GAAP measure can be found in our earnings release.

Before I begin, let me say that I appreciate all of the feedback we have received from shareholders since our last earnings call. I’m well aware of the expectations of our shareholders with regard to the Titanic monetization in our business operations.

Speaking for myself and the entire senior management team of Premier, we recognize that our obligation to shareholders is use to deliver results at the operating level. Frankly, the results for the quarter are both disappointing and unacceptable.

In order to reverse the trends in our operating business, we need three things to happen. First, we need to reverse the year-over-year declines in attendance at our permanent locations. Second, we need to reenter in the New York market. Third, we need to deliver new content to the market. I will briefly discuss each of these as we’ve covered most of these in previous earnings calls.

The first point is reversing the attendance declines at our permanent locations. We have taken some steps to address this decline and we will continue to take whatever remedial actions are necessary to reverse these trends.

Specifically, over the past three months we accomplished the following. One, we terminated the relationship with our previous marketing firm.

Two, we reassigned responsibility for marketing to Marcy Davis. Marcy has been responsible for venue operations and merchandise operations, and had made sets to add marketing toward duties as most of the responsibilities center around our permanent locations.

Three, we hired a new Vice President of Marketing to oversee our marketing operations, revamped the marketing for our permanent locations and build stronger business to business and business to consumer relationships in each of the markets where our permanent locations operate.

Four, we engaged Crossmedia as our new marketing agency. We selected Cross because of their strong brand building capabilities, their significant digital engagement skills and their history of success in building marketing programs design to sell tickets.

In the past, we have discussed at length our digital initiatives, these digital efforts are designed to both leverage our extensive intellectual property libraries and significantly improve our engagement with consumers through the lab, on their mobile devices and through social networking.

Over the last quarter we have made strides to enhance our digital platform, but we are far from where we both want and need to be within the digital world. Our digital initiatives address two big elements necessary to reverse attendance declines.

Initially our digital framework which will include mobile applications, dynamic web content and better access to our extensive IP libraries will support the marketing efforts of Cross and our team to engage our consumers.

Additionally, our digital initiatives will provide the content to add more interactive and engaging elements to our Titanic & Bodies exhibitions, where we -- which will reflect -- refresh the product and give our exhibition a new feel that can be marketed in each of the permanent markets.

Our plan for this digital initiative has been developed by management and we will continue to update our shareholders as these programs begin being rolled out this quarter and in fiscal ‘15.

The second issue revolves around reentering the New York market. It has clearly taken us too long to respond in the closing of our Seaport location and our financial results reflect this.

As we’ve discussed on previous calls, we identify the location in Times Square that for multiple reasons did not result in an execute lease. The pursued of this Times Square location cost us significant time and resources. However, we have since identified another location and are in the final stages of lease negotiations.

This location is not in Times Square -- in the Times Square area, but it’s another high profile area with significant tourist traffic. While I have not a liberty to provide any information at this time on the specific location, the square footage or our intentions with respect to the experiences we plan to deliver in this new location. Opening at this location in New York for summer season is the company's number one priority.

Finally, we need new properties and brands that we can bring the market and operate profitably overtime. Prior to my assuming the role, the CEO role, the company had never established new content development in the requisite capital reinvestment as a priority. This prioritization was a key driver of the AEI acquisition.

More importantly, Premier never had a standardized process in place to evaluate, develop and market new exhibition content. All of this now exist at Premier and is continually being improved, utilizing best practices both inside and outside the entertainment industry.

One of the first things Mike and I did in the new content area was establish financial metrics for our existing and proposed content and we continue to refine this process. The benefits of a well controlled process for new content introduction is a strong contest coupled with strong financial controls throughout the development process, provide exhibitions that will generate positive earnings contribution for many years in the future.

While we have to work more effectively at shortening the time to market for these new concepts, we’ve built a strong pipeline that continues to grow. Additionally, we are looking at strategic relationships that will expand our new content opportunities and give us access to our existing content by leveraging our infrastructure and distribution capabilities.

All of the issues that we’ve identified have cost associated with them. And as our financial results reflect, our cash continues to decline as a result of our investments in Pompeii and Buena Park in our declining results.

As a result, the company faces a need to secure growth capital. While management believes there may be an opportunity -- while management believes there may be an opportunity to secure debt financing given the company currently has no debt on its books. The board is exploring all options to secure the necessary capital resources. The financing is critical to our ability to pursue all of the initiatives and to address the operating challenges at Premier simultaneously.

I can assure you that the board recognizes the company's operating challenges and the need to finance the company’s growth. And they are exploring the full gamut of alternatives to secure the necessary financial resources to enable management to take the remedial actions necessary to stem attendance declines, to open a New York and to bring profitable new content to market.

In addition, although we have nothing new to announce today regarding the retention of advisors to assist the board, we’re pursuing strategic opportunities. The board has been engaged in discussions with potential advisors although none have been formally engaged. I also want to take a minute to comment on the sale of the Titanic assets.

While we have nothing to announce on this topic either, we continue to look at opportunities to monetize these assets for the benefit of shareholders. The company will continue to seek buyers for the assets at a price that the board believes is fair for the shareholders.

While we recognize progress on this front has been inconsistent with some shareholders’ expectations, rest assured the board remains committed to maximizing the value of these assets through exploitation of the collection, the intellectual property and the ultimate sale of the artifacts.

One final comment before I turn the call over to Mike. Given the sensitive nature of our progress on many of the initiatives discussed in the last few minutes, please focus your Q&A on the company’s operating results. We want to make sure that those shareholders interested in getting clarity on our comments in the earnings release and our results for the quarter have an opportunity to do so.

As the board makes decisions on strategic matters, we will disclose those decisions as required in a timely manner and if necessary, we’ll host another call at that time to provide additional color on these decisions.

I will now turn the call over to Michael. After Michael concludes his remarks, we will be happy to take your questions. Mike?

Michael Little

Thank you, Sam and hello everyone. I’m going to start off by reviewing our overall performance and then delve more deeply into a full P&L discussion. For the three-month period ended November 30th, total revenues fell $1.5 million or 19% to $6.4 million from $7.9 million in the fiscal third quarter last year.

The decline in merchandise revenues accounted for the majority of this variance and was both a consequence of lower average attendance at our current venues compared to the year ago period as well as the King Tut's and Cleopatra exhibitions during the same period last year, which increased the merchandise revenues but not the exhibition revenues in the prior year period.

In addition, cycling over the closure of the South Street Seaport in the third quarter which is estimated to have decreased revenues by roughly $600,000 based on comparable results last year. Total revenues decreased by $380,000 or 8.6% to $4 million, compared to the same period last year, primarily as a result of lower merchandise costs as we sold fewer items.

Gross profits were $2.4 million compared to $3.5 million last year, which on a percentage basis reflected decline of 32.7%. Gross margin was 36.8%, which compared unfavorably with the 44.1% margins we achieved last year as we were unable to reduce expenses to a level that matched the revenue decline.

Net loss after non-controlling interest improved to $233,000 from a net loss of $830,000, or on a earnings per share basis to $0.00 per share on a basis of $49.2 million, which compared to a loss of $0.02 per share on a share basis of $48 million from last year. Note that the Hurricane Sandy-related shutdown at the Seaport resulted in an estimated $109,000 reduction in net income after non-controlling interest. While the higher share base was a result of stock options exercised and restricted stocks issued over the past year, net of approximately 387,000 shares and shares repurchase that were completed during this quarter.

Next, I would like to discuss two items of note that impacted our quarter and one further discussion. First, we recorded a $2.4 million non-cash gain on a note payable fair market value adjustment during the third quarter of this year. Our recognition of this theme was based on an update of the ex-expected cash flows from the exhibits related to the AEI, AEG Live LLC note payable.

By way of background, when we entered into this purchase agreement in April 2012 for AEI, we issued a non-recourse non-interest bearing note of $14.2 million to be repaid by future cash flows from only the AEI exhibitions. We then adjusted the note to $16.4 million to account for the prepaid licenses and expenses paid directly by AEI.

The book value of the note was then reduced by $3.7 million for the amount that was not expected to be repaid based on the term of the note, and a $1.3 million to discount the note to the net present value added to imputed interest rate of 7%. Based on the expected repayment amount of $12.7 million and an imputed interest rate of 7%, the fair value of this note was approximately $11.4 million as of April 20th of 2012.

During the third quarter, we updated the future cash flows of the AEI exhibitions and discounted cash flows. The note payable was reduced by the $2.4 million to reflect the estimated future payments under the note agreement. This amount is included in the condensed consolidated statement of comprehensive income and loss as a gain on the note payable fair market value adjustment. As provided in the reconciliation tables, this gain is not included in adjusted EBITDA.

Second, we rolled off $798,000 related to the termination of the non-binding letter of intent for the Titanic sale and long-term development cost related to an exhibition that was underdevelopment that we have since terminated. This write-off is also not included in our adjusted EBITDA.

Adjusted EBITDA decreased by $1.3 million to a negative $655,000, compared to a positive $675,000 in a year ago period. Please review the reconciliation tables at the end of the earnings release to see how we arrive at these figures and how these two items as just described above affected our P&L.

So with that overview let's delve into our results in greater detail. Exhibition revenues decreased by $450,000 to $5 million. We had a total of 23 exhibitions presenting in the third quarter which compared to 26 in the year ago period. And this resulted in 76 fewer operating days.

Attendance also declined 39% from 497,000 to 304,000, and we attribute this decrease in attendance to the closing of The South Street Seaport in New York, smaller markets bought in the current fiscal year and the increase in exhibitions rented to international promoters and museums.

For exhibitions rented to international promoters and museums, attendance numbers are not reported and thus they are not included in our overall attendance metrics. In addition, we also do not recognize revenue, exhibition revenue or attendance metrics for the AEI manage exhibitions, but instead receive a management fee for managing these properties.

Average attendance per exhibition day fell 25% to 298, compared to 399 people although average ticket price at our semi-permanent museums and other locations increased 5% to $16.08, 50% of the decline in the average attendance was related to one of our Titanic shows being in the U.S. in 2014 and in 2014 being sold off to a third party promoter overseas.

Revenue from the self run exhibitions was 70.5% of total exhibition revenue in the third quarter of fiscal 2014, which compared to 58% in the year ago period.

Merchandise revenue decreased $1 million to $1.2 million for the three month ending November 30, 2013. The merchandise revenue declined was a function of lower attendance at our venues and fewer merchandise stores and operations after the closure of King Tut's and Cleopatra exhibitions in January of 2013.

Merchandise per ticket sold fell 8% to $3.25 from $3.54 per person. In the third quarter, the management fee related to the AEI fell to $188,000 from $250,000 in the same period last year as per the terms of the agreement.

Turning to G&A, our corporate expense fell $70,000 to $3.2 million, compared to a year ago period and this was due to lower salary wages and stock compensation expenses that were largely offset by higher professional fees.

Depreciation and amortization expense rose by $167,000 due to fixed assets purchase related to our resale opening at Buena Park and the Pompeii exhibition.

Finally, loss from operations was $356,000 in the third quarter, compared to a loss from operations of $732,000 in the period year ago. This was the result of the aforementioned lower exhibitions and merchandise revenue that were partially offset by the gain on the note payable.

Interest expense was $66,000 for the quarter on our note payable, mainly related to the AEI transaction, which compares against $211,000 in interest expense in that same period last year.

We had an income tax benefit of $163,000 compared to income tax expense of $49,000 the same period in this prior year. The fiscal 2014 income tax benefits relates to the true-up from the fiscal 2013 income tax returns.

The fiscal 2013 income tax expense relates primarily to the federal alternative minimum tax. Note that we have prior operating losses that are being carry forward and mostly offset current taxable income.

In terms of the balance sheet, cash and marketable securities were $4.4 million on November 30 of 2013, which is $1.3 million below our second quarter level of $5.7 million. Part of this variance is related to the increase in prepaid expenses, decrease in payables and the stock repurchases we did during the quarter.

Operator, with that let’s open the line for questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instruction) Our first question comes from Brian Murphy with Merriman Capital.

Brian Murphy - Merriman Capital

Hi, thanks for taking my question. Sam, it sounds like you are pretty confident in some of these new content opportunities. I think you talked a little bit about process there. Could you talk to us a little about how you test some of these concepts and maybe assess the potential for merchandise sales?

Sam Weiser

Sure, I think that -- that’s great question. Thanks Brian. I think that we -- first of all, taken a process where we don’t license the content right away until we’ve had a chance to market the content. And in doing so, what we’re doing is we going out to the various museums and other buyers of our content to assess their demand for the concept. So what we’ll do is we’ll go through a preliminary development of the actual exhibition and then test that against the consumer through the museum network.

Based upon the findings of that museum network that will help us understand the merchandise opportunities because the feedback that we get from the various museums -- the feedback that we get from the various museums basically gives us their reactions to the content and allows us to really assess who the buyer is and what the ultimate opportunities are.

Our merchandise is sold to a very educated consumer people and then what would be considered the mid-income level but with fair amount of disposable income. So our targets on the merch is really to the parents not exactly to the kids.

And so as a result, the combination of both understanding what it is, we want to do with the content in terms of the exhibitions to getting the feedback from the museums and then being able to extrapolate that feedback from the museums, obtaining their commitments and also evaluate -- the merchandise opportunity allows us to really run through the economics of the exhibition over a three to five year timeline and allow us to understand completely what the internal rate of return is that we could get and what the return on our invest capital would be. Hope that answered your question, Brian.

Brian Murphy - Merriman Capital

I did appreciate that. I appreciate all the color. I’m going to hop back in the queue. Thank you.

Sam Weiser

Great.

Operator

Our next question comes from Andrew Shapiro with Lawndale Capital Management.

Andrew Shapiro - Lawndale Capital Management

Yeah. Hi.

Sam Weiser

Hi.

Michael Little

Hi, Andrew. How are you?

Andrew Shapiro - Lawndale Capital Management

I am fine. I appreciate the limitation you have and if you can discuss. But, perhaps, you can give a little bit color here on with that and if you are still evaluating potential bankers all this time? What if anything has been going on in the Titanic asset sales process over the last three months? Can you provide any color on that?

Sam Weiser

Not really, I think that, what I can say is that, our commitment to monetizing assets still exists. And so as a result, we are looking at multiple avenues in terms of that monetization. Not all of which necessarily require the services of the financial advisor.

So I would tell you that, while the Board continues to consider all of the various alternative as I stated, with respect to Titanic, one thing I can assure you, as we haven’t done nothing, which I’m not trying to put words in the amount, but I hope you were implicating.

We haven’t done nothing but we are looking at an evaluation of the people that we have made contact within the past, people who have made contact with us, people who we have solicited, people who have solicited us without request and use that to try to determine, what we think the right pathway is for the monetization. And so that’s what we have done and that’s what the Board is considering and I think that will impact the advisor that we select ultimately.

Andrew Shapiro - Lawndale Capital Management

When do you think that selection is going to take place?

Sam Weiser

I can’t really tell you. I mean, obviously, the Board has it set of priorities and one of them is obviously the engagement of the financial advisor. I think really once they determine what, which will be alternative they want to pursue and how they want to pursue them that will really be the determining factor in deciding what direction they go in terms of financial advisor and retaining that advisor.

Andrew Shapiro - Lawndale Capital Management

Okay. I have several other questions, please come back to me. I’ll go back in the queue.

Sam Weiser

All right. Thanks, Andrew.

Operator

(Operator Instructions) We’ll take our next question from [Ralph Cross], a private investor.

Unidentified Analyst

Hi. Good afternoon. Good afternoon, everyone. I have question on new content, specifically, Ice Age and FBI. I wanted to get a rough estimate on the timeframe for may be bringing those market and you kind of mentioned in past thing how may be things could be brought to market little sooner, how will you go about doing that?

Sam Weiser

Well, I think, that’s a great question. Thank you, Ralph. I think that the expectations for bringing things to market are really driven by two factors. One is the complexity of the content and they require -- and the number of people that are required to be involve.

For example, in the case of Ice Age, the acquisition of specimens and artifacts that we might want to use in that exhibition are fairly difficult to obtain and so -- and obtaining them takes time and requires another well complexity in terms of giving those loan agreements in place. So that will impact it as well.

The other thing that impacts the new content development is the availability of the museums. Obviously, strategically, we are looking to open content in high visibility, high value markets and a lot of times our ability to open in those markets is going to be dictated by the museum and their availability. Did I miss anything, Mike, did you have anything to add?

Michael Little

No. That’s great. You are right on it.

Sam Weiser

Okay. And so I think that really the determining factors are both the complexity of the development process and the number of people that are involved in and getting everything that we need in order to bring the concept to market and two, the availability.

You asked the question also, how we can potentially shorten that process. I think that one of the things that we’ve done that we’ve taken initiative to do as we put our folks in the sales process out on the road more aggressively and then contact more aggressively with the museums where our partners to truly up and better understand their availability. So as we begin to map out potential tours free to the new content opportunities, we’re able to structure that timing around the availability of the museums as I said in the higher visibility markets.

And I think that we can be better prepared and more effective in terms of how we pre-market these exhibitions, that will help shorten the decision-making time and help us get the things to market a lot more quickly. In addition, I think that while these are not short-term projects as we do more projects, I think we’ll get better at it and that will help shorten the timeline and to bring the exhibitions to market.

Unidentified Analyst

When we -- now that’s great information. When these content opportunity come to market, we could see it at where the venues that they are going to be coming to market are, let’s call, Premier venues. They are top-tier venues, that’s -- in other words, all have maybe a little bit more effective over time where you start off in top tier venues and then maybe go down the line in terms of our market size. Is that a fair estimation?

Sam Weiser

That’s one of the objectives. Obviously, tour is a complicated thing to put together…

Unidentified Analyst

Correct.

Sam Weiser

… because you really want to leave it at your downtime. But the goal is to open in more top tier markets for the first three or four shows of the exhibition and then to begin to fulfill demand across the wider aspect.

Unidentified Analyst

Got it. Great. Thank you. I’ll get back in the queue. If I have any additional question?

Sam Weiser

Thanks Ralph.

Operator

Our next question comes from [Kiran Chandrashekar], a private investor.

Unidentified Analyst

Hi Sam.

Sam Weiser

Hi Kiran. How are you?

Unidentified Analyst

Fine. I think I talked to you a couple of months ago. The question is -- a two-part question though. Number one, why would you buy stock -- buy back stock if you’re actually looking to raise money? That’s somewhat confusing to me?

Sam Weiser

I think that, at the time that we initiated the stock buyback program, we felt that that was an appropriate use of our capital. And I think that it’s a dynamic situation. The business is at dynamic situation and there are ebbs and flows and I think that we probably didn’t foresee all the projects in the timelines and how they were getting compressed and so obviously that was a factor.

But we’re hoping that we can finance the growth with that anyway. So I don’t know that it’s necessarily as big an issue. So hopefully, we can secure the growth capital through normal means and then we will be okay.

Unidentified Analyst

Okay. Thank you. If I may very quickly ask you another question, there is an exhibiton right now in the Boston area. It’s a Bodies exhibition by Dr. Gunther Von Hagens. Have we licensed these or are we one off the licensees to the Bodies exhibition? I’m just curious.

Sam Weiser

Dr. Von Hagens is a competitor. And he has his own specimens and he operates in the same markets that we do as a competitor of us.

Unidentified Analyst

Okay. Thank you.

Sam Weiser

Operator

Our next question comes from Don Whitaker, Jr. from Don C. Whitaker, Incorporated.

Sam Weiser

Hi Don. How are you?

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Hi gentlemen. How are you? First of all, could you discuss the buyback? Exactly how many shares you purchased in the last quarter?

Sam Weiser

Mike?

Michael Little

I think we mentioned it as, I think, it was 387,000 shares.

Sam Weiser

Yeah, 387,000 shares.

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

In this last quarter?

Michael Little

Yes.

Sam Weiser

Yes.

Michael Little

It’s disclosed in the queue which will get filed tomorrow but that’s the number that I recall.

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Okay. And then in the big picture, it’s always been the idea that you were going to monetize these Titanic assets and distribute them to shareholders. Now you are speaking of the need to secure capital for growth, has something changed?

Sam Weiser

No, I think --

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Is that in press release or something or?

Sam Weiser

The parallel pass, I don’t know that one has necessarily direct impact on the other. I think that the monetization of the Titanic assets is a clear priority of the business -- clear priority of the company and something that we’ve aggressively pursued since we gained clear title to the assets. I think the growth capital is a -- and that is a more long-term decision. But I think the growth capital is a more temporary issue as we’ve been flooded with opportunities in terms of new venues and new content.

And so we have a financing need that if we were a company in a different position, would probably be easy to go out and secure the necessary financing for in the normal course. It’s a little more challenging for a company like Premier. But one doesn’t necessarily get the other in the sense that the growth capital that we secured may have -- is not necessarily coming from the modernization of the Titanic assets and that impact is not the intent.

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Okay. And lastly, could you discuss the $798,000 write-off due to this letter of intent?

Sam Weiser

Well, it’s not all from the letter of intent. Pardon?

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

I beg your pardon. You said it’s not all from the letter of intent?

Sam Weiser

Right. It was a combination of some deferred costs associated with the auction and associated with other elements of engaging in the sales process. Also in there was the write-off of long-term assets that we had capitalized related to development projects from new content that we no longer pursuing. And so as a result of abandoning those projects, we had to write-off those expenses.

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Of the $798,000, how much of it is related to the non-binding letter?

Sam Weiser

If you can hold out for me for one second?

Michael Little

About $633,000.

Sam Weiser

Little under $633,000 related to the Titanic sale, yeah.

Don Whitaker, Jr. - Don C. Whitaker, Incorporated

Thank you very much, gentlemen.

Operator

Our next question comes from [Ralph Furrow], a private investor.

Sam Weiser

Hi, Ralph.

Unidentified Analyst

Hi, Sam. My question actually was just on the Don’s. My concern has to do with buybacks with one hand and talking about debt financing with the layoff to be sure we are not creating destructive financial engineering here.

Sam Weiser

Well, I can tell you. Yeah, did you ask the question? I don't want to cut you off. I’m sorry.

Unidentified Analyst

Actually, Don raised the same question, are we doing forward planning with buyback on the one hand and financing on the other to be sure we are not doing destructive financial engineering?

Sam Weiser

I think we are aware of the issue and I think we are discussing obviously at the Board level and that’s where it’s at right now. So, yeah, I think that your concern is shared by the Board and it’s been addressed.

Unidentified Analyst

Thank you.

Operator

Our next question comes from [Jay Thomas] with JP Capital.

Unidentified Analyst

Hey, good afternoon, guys. Couple of really broad questions here. Firstly, it’s taken you guys including the Board to really identify new content as a way to drive growth. And then talking about securing a new lease in New York, which I think you guys are doing which is the right path to follow. You guys are hiring a new marketing firm, enhancing digital content, et cetera, et cetera. And all the while, the operations have really stagnated and you guys have come to the realization now probably you can say nine months.

And my question is why it has a, taking you so long and b, how do we gain really comfort with what you guys are proposing because it kind of seems that you guys do a phenomenal job of really talking the talk, but in terms of execution you guys have come up a little bit short? So if you can just provide little bit color here, it would be much appreciated?

Sam Weiser

Well, I think that the assumption that it’s taken us nine months to figure it out is truly accurate. I think we’ve known all along what the game plan was for -- I don’t want to say this, for achieving what I would call sustainable ongoing revenue streams that can support the operating business.

I think that there have been some distraction and some miss gaps on the way. And clearly our focus and as I try to communicate in the narrative of my remarks is they were trying to stay focused on a very short list of things that need to get done in order to stabilize and turn the business around and back in the trajectory that it was in a year ago.

I think that we understand that and we recognize it and I think that the New York location was established as a priority for this current fiscal year, our regional intentions and I think we discuss this on other calls was to be open by the summer in New York. We identified our location. We went through a very exhaustive and extensive process on the engineering side, the architecture side, police negotiations and we ultimately couldn’t get a deal done that made sense for the company as it was a long-term deal with lots of financial obligations associated with it over a long period of time.

And so ultimately despite the fact that we really wanted to be open and present in the New York market, no matter how strong that desire was on our part, we work on it make a bad deal. And so we suspended those discussions over the summer and started looking for a new location and have found a new location that run the latter stages of negotiation and we set back a year, I mean, we’re looking at the summer of 2014 to open in New York and we intended to do so in 2013.

I don't think we foresaw the difficulties we’d have in finding suitable locations in New York. Noted we think that we would have the dealt level of difficulty we had in finding affordable locations in New York. And when I say affordable, I mean, affordable by New York standards because clearly we understood the market. But on a relative basis, we had a fairly attractive deal at the Seaport and we needed to find something that we could operate in appropriately given the economics of our business. So I think, we found that. I think we’re in the right location and hoping that we have something to announce in the very near future.

Unidentified Analyst

Got it. And if I just may follow up really quickly on that so and you are restricted in what you can say. But I think and I can speak on behalf of some of the shareholders here is, you spent a long time negotiating the previously sometimes square and it came to nothing and it distracted management’s time away from the business. How comfortable are you that this will actually get done understanding that nothing is done until that time unsealed?

Michael Little

Let me make a few comments to that regard. This landlord has been very accommodating. This landlord has engaged in a tremendous amount of work in expectation of our signing the lease and in order to get the building in a position to be delivered to us very, very quickly, once that lease is executed. They’ve also been very accommodating on terms in terms of duration and things like that. So this has just been a completely different negotiation than the previous negotiation.

As you point out, I’m not confident of anything happening until we actually both sign the document. But I feel fairly comfortable that we’re down to a list of open items that is manageable and likely to get resolved in the not-to-distant future.

Unidentified Analyst

Thank you Sam, I appreciate the color.

Sam Weiser

No problem.

Operator

(Operator Instructions) Our next question comes from Andrew Shapiro with Lawndale Capital Management.

Spencer Green - Lawndale Capital Management

Hi, this is actually Spencer for Andy. Following up a little bit on New York here, you mentioned, if you get some time by next summer, could you be more specific with the amount of time that you expect to generally for show to ramp up and goods to production and actual attendance, once the lease is signed regardless of one at a time?

Sam Weiser

So, let me say that we’re planning to open in the summer.

Spencer Green - Lawndale Capital Management

Okay.

Sam Weiser

Not signed in the summer. So we think that it will be anywhere from 90 to 120 days from when we take possession of the building to our ability to open up. What we will open up and when we will open it up, it will be a function of numerous factors, not the least of which -- a relevant cost. But regardless of that, once we get the space, once we sign the lease, we will begin executing a marketing plan that we’ve already began to put into place. We know we are going back to New York.

So when we hired this new firm Crossmedia and in addition, Marcy and the new Vice President of Marketing that we hired are both incredibly familiar with the New York market and so we are ready to go. We just don’t want to commit any resources till the actual lease is signed. Once it’s signed, we are going to hit the ground running and we are hoping within 90 to 120 days to be open.

Spencer Green - Lawndale Capital Management

And if I may briefly go back to the exhibits here, Buena Park now has had the benefit of a full uninterrupted quarter of operations and just wanted to kind of find out, what’s become the momentum that you had originally seen for the partial Q2 and then in August going here into Q3?

Sam Weiser

So it’s an excellent question. What I will exert that our preferred response was it that all of the permitted locations that we are in have seasonality and all of them, and in part of the reason why we have the mix that we do, have different levels of seasonality. We had a really what I would consider to be good quarter at Buena Park. It did knock it out of the park, but we did exactly as we expected to do in Buena Park in the second and third quarter.

Without giving into too much detail, we are hitting some headwinds in the market and we are looking at ways to expand our market reach going into the spring season. Obviously whenever you change your marketing approach in any event it takes time to get the information into the market and to get the market penetration that you want from the new marketing strategy.

So we recognized early on that we had a fairly narrow reach in Buena Park, although was very strong with respect to where the zip codes were coming from in terms of our ticket buyers. And we are working very hard now with Crossmedia to develop the strategy to expand the universe of our reach in terms of the zip codes in order to get a broader base of client talent and to reinvigorate the results there. So we're looking forward to a strong spring based upon this new strategy.

Spencer Green - Lawndale Capital Management

Sure. And that same question finally with regards to Pompeii. I know you had opened in November, so not a huge piece of it partially in this quarter, but can you kind of give us an update barely on the progress and if it’s meeting your initial expectations for attendance and operations?

Sam Weiser

I think operationally, we are doing fine. I think that one of the things you didn’t ask at all that allow is that I think demand for the exhibition is strong and we’re hoping to get an extension from our Italian partners, so that we can continue to tour after the three cities. With respect to tenants, I would say that tenants for the Pompeii Exhibition is probably in line or little better than what we had originally anticipated.

They had a very strong holiday season in Philadelphia. The other part, obviously will be the school groups over the winter as the weather turns and people look -- the school groups look for inside activities for the field trips as well as the winter break and spring break season in the Philadelphia market. Those will be the final determinants. But the run rate right now is consistent and relative to where we were with Titanic for the same engagement period a year ago or year and half ago.

Spencer Green - Lawndale Capital Management

Okay. Thank you.

Sam Weiser

All right.

Operator

Our next question comes from Jason Stankowski with Clayton.

Sam Weiser

Hi, Jason, how are you?

Jason Stankowski - Clayton

I’m good. I’m a bit new to the story but I’ve listen to last couple of calls. And I’m just curious on the caller’s question about engaging banker for the sale of the assets. Your answer indicates -- does your answer indicate that there’s a new potential structure that you guys hadn't thought of in the prior contemplation of sale? I know that there’s a couple different ways to monetize the assets, impact sensitivity. But have you learned of the new structure in the last three months that leaves the Board deliberating on the most intelligent way to go about this, or otherwise why would they need three months to figure out the path to go down and hire a banker?

Sam Weiser

Well, first of all, I will project the clarification so that I can clarify my answer. The answer to your overall question of whether or not we found anything new, the answer to that is no. I think what we've tried to decide is the appropriate pamphlet based upon all of various alternatives and all of the information that we gathered from the last process that we went through. And it isn’t clear -- let me say in a different way. It hasn’t been explicitly clear that a financial advisor is the solution for the monetization of those assets and what I also was inferring is that financial advisory services come in many shapes and sizes.

So we haven’t quite determined exactly what it is that any financial advisor we retain will do for us and the scope of that project. So, I think that you have to look at it in a scope of there are all kinds of potential alternatives. One of them is the exclusive sale of the Titanic assets, and for that there are certain requirements that would be needed from a financial advisor. But there are other alternatives that are been explored and if those were to have different implications for the banking relationship then we would engage in. So that was the need that was the purpose of my response.

Jason Stankowski - Clayton

Okay. And I appreciate the clarification. It just seems a little unusual but maybe there’s just not that many paths to go down and you really got to think it different. Is there anybody that works 100% of their time everyday, all day trying to figure out how to get the, at the company that does that 20, kind of their full-time job to affect the monetization?

Sam Weiser

Not right now.

Jason Stankowski - Clayton

Okay. I’ll get back in the queue. Thanks.

Sam Weiser

All right.

Operator

Our next question is from [Ralph Cross], a private investor.

Sam Weiser

Hi, Ralph.

Unidentified Analyst

Hi. Just -- hi, everyone. Just want to ask one more question on Crossmedia. Is there any incremental spend on your marketing budget or you’re just redirecting your dollars towards this outside agency to help you better market the existing properties?

Sam Weiser

I think that the answer to that question, we’re actually got incremental savings as a result of our engagement of Crossmedia, because it’s a different kind of media mix that they are searching there to achieve. So, on an incremental basis it's been a net savings.

Unidentified Analyst

Okay. Great. Thank you.

Operator

There are no further questions in the queue at this time.

Sam Weiser

Okay. Well, I’ll say a few things as if anybody gets back into the queue but if not, we thank you very much for your time and attention today. As always, if you have any further questions or would prefer to speak to Mike and I individually, please feel free to call us in Atlanta at your convenience, we are always available. And as I said, should anything come up between now and our year end earnings call of significance we will engage another call at that time to give all of you an opportunity to understand what we're doing and give you the opportunity to ask questions. So, again, thank you all very much and we look forward to speaking to you soon. Operator, are you there?

Operator

Yes.

Sam Weiser

I think we’re done.

Operator

That concludes today’s conference. Thank you very much for your participation.

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