Premier Exhibitions' (PRXI) CEO, Michael Little on Q1 2015 Results - Earnings Call Transcript

Jul.15.14 | About: Premier Exhibitions, (PRXI)

Premier Exhibitions Inc. (NASDAQ:PRXI)

Q1 2015 Earnings Conference Call

July 15, 2014 8:30 am ET

Executives

Michael Little – Interim President and Chief Executive Officer, Chief Financial Officer

Analysts

Brian Murphy – Merriman Capital

Andrew Shapiro – Lawndale Capital Management

Operator

Good morning and welcome to the Premier Exhibitions’ First Quarter 2015 Earnings conference 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, and these forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties. Although Premier Exhibitions believes that assumptions underlying the forward-looking statements contained herein are reasonable, any such assumptions could prove to be inaccurate; therefore, the company can provide no assurance that any of the forward-looking statements will prove to be accurate.

In light of the significant uncertainties and risks inherent in the forward-looking statements included in this call, such information should not be regarded as a representation by Premier Exhibitions that its objectives or plans will be achieved. Included in these uncertainties and risks are, among other things, fluctuations in operating results, general economic conditions, uncertainties regarding financing alternatives, and competition. Because they are not forward-looking, such statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Premier Exhibitions’ most recent annual and quarterly reports filed with the Securities and Exchange Commission, included under the heading entitled, Risk Factors. Premier Exhibitions does not undertake an obligation to update publicly any of the forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

Now I’d like to turn the conference over to Mr. Michael Little, interim CEO and President and Chief Financial Officer of Premier Exhibitions. Please go ahead, sir.

Michael Little

Thank you, Operator, and good morning everyone. I would like to remind you that during today’s call, we will discuss adjusted EBITDA, a non-GAAP financial measure that we use as a key metric for evaluating the performance internally. Adjusted EBITDA also provides investors with additional information to facilitate the comparison of past and present performance, and an explanation and reconciliation tables to the nearest GAAP measure can be found in our earnings release.

Now let me begin with a general business update before reviewing our financial results for the three-month period in greater detail. First and foremost, we are nearing an agreement on securing growth capital. This would enable us to act upon the strategic priorities we have laid out on prior conference calls, which includes first and foremost completing the New York build-out with quality exhibitions, but will also allow us to begin to refresh our stationary Titanic and Bodies properties and will allow us to continue to build our new content pipeline with projects such as Ice Age.

Assuming the capital is in place shortly, we should be able to open New York this coming fourth quarter with the actual exhibitions to be determined in conjunction with the financing parties. In addition in any event, we are hopeful that whatever content we would showcase in the midtown Manhattan would draw strong interest from both tourists and locals alike.

Our time frame has obviously shifted from what has been provided previously for the New York location as we had earlier hoped to be fully operational ahead of the holiday season; however, based on where we stand today, we’ve determined that a late fall opening of any exhibition would have resulted in a $1.5 million incremental construction cost for double and even triple overtime. Based on our cash projections, incurring this higher upfront cost outlay could not be justified relative to the expected cash flows from the exhibit and merchandise sales that we would capture during the start-up of this exhibit, and given other cash needs of the company.

Turning to Titanic and Bodies, we are confident that we can revitalize and better deliver operating performance, but as we’ve said in the past, that of course requires capital. Without it, they are likely to continue to decline, as reflected in the first quarter results and has been demonstrated over the past several quarters. From our vantage point, the best place to refresh these properties is within the confines of the semi-permanent exhibitions. This will in turn spur the curiosity and interest of our museum partners and other promoters, who then may consider requesting touring dates for their venues.

At the same time, we have also expanded the breadth of our exhibitions and forged new partner relationships. These are beginning to bear fruit, and with additional capital there will be even more of these opportunities to diversify our content offerings. While these content offerings are relatively small scale and won’t significantly alter the path of earnings in the near future, a more diversified portfolio of exhibition properties over time we believe will lead to more consistent exhibition revenue and an improved profile of the company in the marketplace.

Specifically, Pompeii is now being exhibited in Los Angeles at the height of the tourist season in southern California. The metrics for LA are stronger than they were in Philadelphia, although we were unable to take full advantage from a revenue and contribution margin standpoint due to the deal structure, which we inherited as part of the AEI transaction. Pompeii is then slated to move to Seattle in February of 2015 where it will be shown through May of 2015. Extreme Dinosaurs is now being exhibited at Atlantic Station in Atlanta in partnership with Dinosaurs on Earth, and we are exhibiting King Tut in Kansas City at Union Station while Pirates is currently being shown in San Diego and Galveston.

Before I review the financials, let me just add that the strategic alternative process that we are pursuing in conjunction with JP Morgan is still ongoing. Again, we will not provide details on this process while it is ongoing, but the board and JP Morgan are working diligently. The independent appraiser that we engaged to complete the new appraisals of the entire collection, including all the artifacts and the IP, is nearing completion. This is a key step to assist the board in maximizing the value of this collection for its shareholders.

Turning to the numbers themselves, for the three-month period ending May 31, total revenues fell 16.2% to $7.5 million from $8.9 million in the first fiscal quarter of last year. Exhibition revenue decreased 12.3% while merchandise revenues declined 29.4%. Total cost of revenue rose 20.8% to $4.4 million from $3.6 million compared to the same period last year, and as a percentage of total revenue was 58.8% compared to 40.8%. We faced an increase in licensing fees due to the Pompeii exhibitions along with higher non-reimbursable build cost expenses from our Pompeii and Buena Park exhibitions which negatively impacted cost of exhibition revenue. In addition, cost of merchandise revenue was affected by self-operating more merchandise shops compared to last year.

Gross profits were at $3.1 million compared to $5.3 million last year, which on a percentage basis reflects a decline of 41.7%. Gross margin was 41.2%, which compared unfavorably with the 59.2% margin we achieved last year. While the decrease in gross margin is a function of the decline in revenue, it is also a function of the mix between permanent and touring exhibitions. Touring exhibitions tend to have lower revenue but higher margins because we do not absorb the cost on the balance sheet or income statement. During the quarter, we had a higher mix of semi-permanent locations with the opening of Buena Park and adding Dinosaurs in Atlanta.

Adjusted EBITDA decreased $2.4 million with a negative $134,000 compared to a positive $2.3 million in the year-ago period. Please review the reconciliation tables at the end of the earnings release to see how we arrived at these calculations. Finally, net loss after non-controlling interest fell to $1.2 million from a net income of $1 million or a loss of $0.02 on a share basis of 49 million shares, which compared to an income of $0.02 on a share base of 49.5 million last year.

So with that, let’s delve into our results in greater detail. Exhibition revenue decreased $839,000 or 12.3% to $6 million from $6.8 million in the same quarter last year. Revenues from self-run exhibitions was 62.6% of total revenue in the first quarter of fiscal 2015 compared against 49.6% of revenue in the first quarter of 2014. These comparisons excluded the AEI portfolio. We had 20 exhibits presented in the first quarter which compared to 19 in the year-ago period. Fewer days in transit resulted in 304 additional operating days; however, six exhibits presented in the quarter were rented to overseas promoters compared to only two last year. Please recall that rented exhibits are charged a flat rate fee which limits our risk but provides limited upside potential through revenue sharing, and also recall that we do not record the attendance metrics for these shows.

The six rented exhibitions, all of which were overseas, generated $1.3 million in non-refundable licensing fees for the quarter, which compared favorably to the $732,000 we booked in non-refundable licensing revenue last year. As I referenced a moment ago, we had one additional semi-permanent exhibition compared to last year, which is Buena Park, for a total of seven semi-permanent exhibitions, although we had fewer partnered exhibitions, for a total of eight versus 12.

Total operating days grew 27% to 1,426 days from 1,122 days, but total attendance for the semi-permanent and partnered exhibitions fell 9% to 496,000 from 546,000. Average attendance per day similarly fell 9% to 462 people compared to 510 people, given the smaller markets we are currently operating in compared to the earlier period. If you look exclusively at our semi-permanent exhibitions, you will notice that operating days increased 20% to 552 days from 460 days, and total attendance likewise grew 20% to 206,000 from 172,000. This of course resulted in the average attendance per day holding steady at 374 people; however, the average ticket price fell 11% to $19.44 from $21.90 as lower priced tickets in Buena Park impacted this metric.

Merchandise revenue decreased 29.4% to $1.3 million. The decrease is the result of lower attendance and the decrease in average retail per attendant for semi-permanent and partnered exhibits. Merchandise per ticket sold for semi-permanent and partnered exhibits fell 27.2% to $2.67 from $3.67, and fell 12.5% to $3.28 from $3.75 per ticket sold at the semi-permanent exhibitions due to weaker demand for the product.

Turning to G&A, our corporate expense fell marginally to $3.3 million compared to $3.4 million in the year-ago period. This was primarily due to the lower compensation expense and professional fees offset slightly by an increase in rent and other expense. Depreciation and amortization expense rose by $166,000 due to the fixed asset purchase related to the Buena Park venue, and Pompeii and the Pirates exhibitions.

Finally, loss from operations was $1.4 million in the first quarter compared to a gain from operations of $1.3 million in the period a year ago. Interest expense was $23,000 for the quarter, which compared against $138,000 in interest expense in the same period last year. In terms of the balance sheet, cash and CDs were $3.5 million on May 31, which is virtually unchanged from the previous quarter.

Before we take your questions, let me leave you with the following takeaway. Although the first quarter itself was disappointing, we think we are on the cusp of a positive shift in our business trajectory that will be made possible through the infusion of the new capital and the opening of the New York venue. Outside of the New York exhibit, we expect the new capital infusion will begin to translate into increased revenues 9 to 18 months from the time we secure this capital. When these steps are underway, we believe we will be in a better position to grow the revenue base and bring quality exhibitions to the market.

With that, Operator, let’s open the lines for questions. Thank you.

Question and Answer Session

Operator

[Operator instructions]

We’ll have our first question from Brian Murphy with Merriman Capital.

Brian Murphy – Merriman Capital

Hey Michael. Thanks for taking my question, and glad to hear that you’re closing in on some financing here. I’m wondering if you could characterize the macro and overall demand environment – would you say it’s better than it was a year ago? Just anything there would be helpful.

Michael Little

From a macro perspective with our attendance trends, we’re pretty consistent year-over-year at most of our permanent exhibitions. The big variable for us is the touring exhibitions and the revenues those touring exhibitions generate for Premier.

Brian Murphy – Merriman Capital

Okay. Could you give us a little bit more color on the refresh that you’re going to do with the Titanic and Bodies exhibitions? What do you think is really going to—what’s it going to take to move the needle there in terms of attendance?

Michael Little

Historically as the company, as Premier has always looked at any of these brands, we’ve always—we’ve loaded these exhibits into these permanent exhibitions or even in to one property, and the company has lacked reinvestment into Titanic and Bodies. One of the things that we’re looking at is to modernize any of the exhibits and bring in some more of the digital aspects and to create more of a hook, whether it be into Titanic or in Bodies, to have the consumer to be able to message that into the marketplace and ultimately have the consumer buy more tickets.

Brian Murphy – Merriman Capital

Makes sense. Okay. I’ll jump back in the queue. Thank you.

Michael Little

Thanks Brian.

Operator

Again, that’s star, one to pose your question. We’ll go next to Andrew Shapiro, Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Yes, thank you. I have several questions. I’ll ask a few and back out into the queue, but please don’t kill the call until we are finished with you. First thing I wanted to do is can you—you didn’t make any comments or mention, and I would think you’re at least aware of the process of the timing, the intent of the board regarding the CEO search. You obviously have the title of interim. You were here with the specialization for being CFO – I don’t know if you are or want to be a candidate for the final situation. What is the timing, the plan of the board regarding the leadership search and its impact on the financing package?

Michael Little

Well first of all good morning Andrew, and I know you’re calling in from the west coast so I appreciate you being up this early.

Andrew Shapiro – Lawndale Capital Management

It’s still dark here – yeah.

Michael Little

I’m sure. As for the CEO search, the board has been working with a national recognized search firm, and this has been ongoing for several weeks. So the qualities of the new CEO will really be a board decision and not mine, so we are actively out in the marketplace looking for a CEO for Premier.

Andrew Shapiro – Lawndale Capital Management

That means there’s a retainer fee that’s been paid and we’d probably want to minimize the whole effort. Can you say what search firm is representing the company?

Michael Little

We cannot disclose, but it is a nationally recognized search firm and a retainer has been paid.

Andrew Shapiro – Lawndale Capital Management

Okay. You also mentioned you’re nearing an agreement on the financing. On past conference calls, there was a stated goal of $10 million and a wish list for the $10 million of at least five items, some of which we have discussed with you on the past calls, maybe longer term in terms of utilization as well as payback, and that the cost estimates of this financing package you guys spoke of were quite high, and there’s the question that’s very concerning to us shareholders of potential dilution. We raised the issue of scaling back the financing to a smaller amount that dealt with near-term projects and the highest payback to enable the success of the first round, so to speak, to lower the cost of the upfront round as well as potentially lower the costs and risks of the second round of financing. How has this financing package evolved as you’re nearing agreement on this in terms of your estimate of the costs, the size of the package, and whether the intent and wish list on this financing has been shrunk down?

Michael Little

Okay, all great questions, Andrew. We are in active negotiations with this third party lender, so at this moment I do not wish to disclose all those details on the funding package. We are expected, as I said, to close here shortly. We are well aware of what our shareholders have asked us and they have given our concerns, and we have felt that message up to the board. As for the dilution, the board has also many factors to consider in negotiating the financing; but yes, I can confirm the board certainly has considered the dilution effect from any of these proposals.

Andrew Shapiro – Lawndale Capital Management

And is equity on the table in this financing, which was represented in the past to be—I guess to be all debt? I’m not clear after looking at the transcript from the last call, but it seemed like it was going to be a very high interest rate. It didn’t seem to have a reference on the equity kickers.

Michael Little

Andrew, at this point those details and this financing arrangement, I do not wish—we cannot disclose. Once we are able to execute on this contract, or on this funding, we will disclose those terms.

Andrew Shapiro – Lawndale Capital Management

Okay. I have more questions. Please come back to me. I’ll go back in the queue.

Michael Little

Okay, thank you, Andrew.

Operator

Again, star, one for questions. We’ll pause for any additional callers.

We’ll go back to Andrew Shapiro, Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Hi. Let’s focus a few questions here on New York, if we can. Your prepared script implied, I guess, that the exhibitions to be in there are not yet to be decided, but it also seemed like it implied that the financing parties would have a role in deciding which exhibitions would be placed in New York. Is this with respect to the broad big financing package, or are you talking to some parties specifically to financing New York?

Michael Little

It is on the broad financing package, so depending—as you stated earlier, depending on the amount of money and how much we typically—how much we’ll draw down on this credit facility, and those choices on how we allocate that capital on building out the space and what exhibitions will be played in that space.

Andrew Shapiro – Lawndale Capital Management

So the financing party is going to have a say, you’re saying, in the operations?

Michael Little

We don’t know yet. We do not know yet.

Andrew Shapiro – Lawndale Capital Management

Okay. In terms of the time frame shifting, I appreciate the company’s focus on balancing revenue generation with the incremental upfront costs of running construction crews in New York and overtime and all that. So can you give a little bit more color, then, regarding—I guess we’ll call it the cost benefit timing; in other words, when you are now timing New York and based on the timing of New York to be, it sounds like, a little bit later and missing some of the busy season, when we’re thinking the openings would occur and to what extent that impacts the previously provided revenue and cash flow projections for the location’s first year?

Michael Little

Again, very good question. The previous estimates that Sam Weiser made cannot be made—cannot be confirmed. The critical thing for Premier is to get New York open, and then once New York is open we can reaffirm some projections as we move forward. But it is too premature as it stands today for us to reconfirm those numbers and those EBITDA estimates that Sam threw out there.

Our timing on New York specifically, as I said in my speech, will be the fourth quarter of our fiscal 2015, so we are looking at potentially targeting a January-February opening in New York.

Andrew Shapiro – Lawndale Capital Management

In the heart of winter? Does that make sense? Does this mean that in the first few months, we would be burning through cash, or any time we open this thing it will be a positive contributor to gross profit and cash flow?

Michael Little

So with New York and the seasonality of New York, there’s a couple of really critical times of year in New York. Certainly the summer months are very strong in New York. The next strong period in New York is around the spring break time period, so by us opening in February, it allows us to work through the operational issues to get this exhibit open to be ready for the ultimate consumer experience come March 1. That’s why the February date is real critical. The last important time period in New York is also around the November-December time frame, so we are gearing to open this exhibit and have this exhibit open in February so we can be in time for the spring break tour season and local season.

Andrew Shapiro – Lawndale Capital Management

Okay, and in light of that, does the company have negative burn it’s got to deal with, with the fixed costs and the term of the lease, or is the term of the lease not starting until the days we’re open here?

Michael Little

The term of the lease—just recently the term of the lease, the landlord handed us the building in July, and with the field structure in place there is significant free rent up front, so we are expected to start paying rent in the February time frame.

Andrew Shapiro – Lawndale Capital Management

So we’re not going to have the benefit of several months of revenue stream with no rent that you initially had anticipated, then?

Michael Little

That is correct.

Andrew Shapiro – Lawndale Capital Management

All right. Regarding the appraisal, can you give us any more insight as to when and how we will hear more information on your appraisal process?

Michael Little

As of now, the process is happening. We have not disclosed what that process is. We have engaged a local—not a local but a national appraisal, a reputable third party appraisal to go through the analysis. We’re expecting this to happen or be complete within the next several weeks, but at this time the board has not made any decision whether or not we will make an announcement on those findings from the appraisal.

Andrew Shapiro – Lawndale Capital Management

So we may be in the dark here all the way through the next quarter’s operating results and conference call, rather than an 8-K or something being provided to give us the information sooner?

Michael Little

We do not know that, and obviously we will—the board is aware of what the shareholder is asking, and that’s a board decision whether they’re going to disclose the results of this appraisal.

Andrew Shapiro – Lawndale Capital Management

Okay. (Indiscernible) the appraisal so far down the road and close to its completion, does management have a better idea of the value of the intellectual property obtained from the 2010 exhibition—expedition, and the 2D and 3D imaging all factors that Sam mentioned on the last call were—

Michael Little

We do not at this time.

Andrew Shapiro – Lawndale Capital Management

Okay. What other steps have the company and JP Morgan made with regards to monetizing the assets further, and whether—is it going to be the exploration of a sale increasing exhibition merchandising revenue and other things, or—and I can’t recall, is JP Morgan’s focus solely on the Titanic asset, or also on strategic alternatives for the overall company?

Michael Little

JP Morgan is engaged to look at all strategic alternatives for the company.

Andrew Shapiro – Lawndale Capital Management

Okay, and they have done their work, they have made their recommendation to the board – is this correct? – and now they are pursuing whichever secret steps the board has instructed them to do?

Michael Little

They have completed some of the work. They continue to work through the process; and yes, they’re in weekly contact with the board.

Andrew Shapiro – Lawndale Capital Management

Okay. Is there any estimation of timing, when bids are due, I guess things that are being done differently than the last process that failed?

Michael Little

The last process entailed we hired an auctioneer to sell specifically the Titanic assets. This time, we’ve engaged on JP Morgan to look at all alternatives for the company.

Andrew Shapiro – Lawndale Capital Management

Okay, I’ll back out. I’ve got more questions.

Operator

Again, that’s star, one if you’d like to pose a question. We’ll pause to see if we have any additional callers.

Again, star, one for questions.

We’ll go back to Andrew Shapiro, Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Well, let the absence of everyone else be a lesson to the board of directors and management about never having a call at this ridiculous hour on the west coast. You obviously have a lot of west coast shareholders. Those prior calls held at normal hours had more shareholder interaction.

Michael Little

Andrew, that is not true. We have shareholders throughout the world, and it’s not just west coast. But as I said in my email to you, Premier will—our next earnings call will be in the afternoon to more accommodate your schedule.

Andrew Shapiro – Lawndale Capital Management

Yes, well it could accommodate others. What is true and is factual is that I seem to be the only one other than Mr. Murphy at Merriman, who is handling the financing, who is asking questions.

Why are we self-operating shops if they result in lower margin, and are we getting higher gross profit dollars from the operating decision to self-operate these merchandise shops?

Michael Little

With the strong per cap, you absolutely can have very strong merchandise margins.

Andrew Shapiro – Lawndale Capital Management

You can have it, but we’re not having it.

Michael Little

Understand when you look at our operating results and you look at our permanent shows and what we’re generating on a per-cap basis, yes, they are operating profitably. Some of it has to do with your year-over-year comparison as you deal with some of your touring exhibitions, and some of those touring exhibitions are in the overseas markets. With those overseas markets, we have less likelihood of running operations in those foreign markets, so that’s also impacting and pushing down those merchandise stats. But from a profitability—the merchandise profitability, we are profitable on any of our permanent exhibits for Bodies, Titanic – any of the other brands that we’re running out there.

Andrew Shapiro – Lawndale Capital Management

Okay.

Michael Little

It’s certainly—you know, our issue as you know is we have a—we’re challenged with revenue, and we need to sell tickets. When we sell tickets and we bring people through the door, we can sell merchandise to those individuals. So the company is focusing on selling tickets in the operating results.

Andrew Shapiro – Lawndale Capital Management

Okay. Now one of the things that’s coming through in your results, I believe, is your average ticket price. In order to maintain your attendance, your average ticket price has come way down as a result of discounting, and if discounting is a primary way of attracting attendance, it would imply to me that your attendee demographics are skewing. If your attendee demographics are skewing, are you seeing this as an impact on merchandise sales; and if so, what is the company doing to determine any shift in attendee demographics who are taking the bait here on the discounting to optimize your merchandise offerings and your merchandise gross profit?

Michael Little

You are correct – as you discount your tickets, you do push down your merchandise per cap. That is an accurate statement. What’s driving our overall decrease in average ticket prices is Buena Park, so when you look at Buena Park – and it’s not about discounting tickets at Buena Park. Buena Park is a unique market that prices different than a Vegas market or a New York market or an Orlando market. It has a different cost structure than any of the other markets, so we price at a lower ATP in Buena Park than we do in Vegas. So as Buena Park has come online and we’ve added the attendance and the revenue to the overall mix, it has pushed down our average ticket price. It does not mean that Buena Park is not profitable. Buena Park has a different cost structure than a Vegas and any of the other markets, so we look at these as standalone businesses and make the appropriate decisions on setting ticket pricing. We’ve actually—go ahead?

Andrew Shapiro – Lawndale Capital Management

No, no – go ahead. I’m sorry.

Michael Little

So actually if you look at year-over-year, we’ve been trying to minimize some of the discounting in the marketplace.

Andrew Shapiro – Lawndale Capital Management

Okay, well I guess we can’t see that from here. So I understand the distinction of the markets and what you’re doing, but can you give us a little bit better color on the merchandising, merchandise revenue action—you know, gross margin and the merchandise profit that’s going on at Buena Park, because it seems like we’re mutually acknowledging you’ve got different demographics there. Are you, I guess, stocking the shelves differently and moving as much product and generating as much gross profit dollars out of Buena Park on the merchandise side?

Michael Little

We aren’t. Buena Park is a different marketplace. It’s more of a tourist marketplace. We stock the shelves differently than we do in Vegas or in Orlando or in Atlanta, so we’ve had good results coming out of Bodies, we’ve had less than expected results coming out of Titanic in Buena Park. So we’ve looked at the marketing message and we’ve recently implemented new messaging in the marketplace and a different marketing strategy to try to drive attendance into Buena Park.

Andrew Shapiro – Lawndale Capital Management

If we can move onto the company’s, we’ll call it overall maximizing of value process here outside of the JP Morgan, you’ve said in previous statements—Sam has said that based on updates on the process, you guys believed the market cap of the company didn’t adequately reflect the non-Titanic assets. Since the stock has gone down further since the last earnings announcement, are we safe to assume that this is still management and the board’s view, or has anything changed that would no longer make this true?

Michael Little

The management and the board certainly believe the company is undervalued relative to the market cap of the company as it stands today.

Andrew Shapiro – Lawndale Capital Management

Right – no, I understand the company as a whole. That is a no brainer because of the Titanic, but in the past you guys have said that the non-Titanic assets, the rest of the business was worth more than the then-market cap on the company. Now the market cap has dropped, the New York positive cash flow has been delayed. We’ve burned through some cash and we’re not necessarily seeing the operating performance you’d like to see to finally get a feel for whether the board and management still feel, in light of the decline of the market cap, that the decline of the operating business, whether or not the non-Titanic assets in your guys’ view in value is being undervalued by the market.

Michael Little

The management and board still believe the operating entity is certainly undervalued relative to the market. As we said earlier, it’s important for us to get New York online, and New York basically can generate significant revenue for this company and margin for this company. We’ve been not able to open New York in the third quarter due to the funding constraints, so it’s important that the company get this funding in place and get New York built in to start generating revenue and start generating profits and make the operating business—return it back to profitability.

Andrew Shapiro – Lawndale Capital Management

Right. Now that, I guess, I totally agree with you, and that’s where I’m really just concerned about the dilution and other factors about who is in on, I guess, carving up to shareholders, because we mentioned how the financing costs you guys are talking about to raise this money were quite high, should be attractive. Many months have now passed, and I am shocked that we never got a phone call offering us an opportunity or the term sheet to potentially participate in such a potentially attractive finance. So is Merriman scouring the earth? Are they being robust enough and getting you the lowest cost of financing, or are shareholders going to be diluted and carved up here to the exclusive benefit of they and their buddies, or someone who is connected to the board to the dilution to the rest of the shareholders? I’m just concerned that shareholder value might not be the main focus and attention leader of the board or of your financing house.

Michael Little

Our board is looking at the ultimate value for all of the shareholders, and they will continue to look at this as we kind of close this funding package and take all options into consideration.

Andrew Shapiro – Lawndale Capital Management

So why not go to the shareholders to raise the money?

Michael Little

That is one alternative that the board will look at.

Andrew Shapiro – Lawndale Capital Management

Well if the board’s looking at that alternative, how come the shareholders haven’t been contacted to raise the money?

Michael Little

Andrew, I’m not going to get into details with it about this.

Andrew Shapiro – Lawndale Capital Management

Okay. All right, well, we’re putting it out there.

Michael Little

Understood.

Andrew Shapiro – Lawndale Capital Management

If—on the last call, you mentioned that there was a significant need for the company, especially for the New York location, to have significant digital campaigns. Can you update us on the steps you guys have made since the last conference call in updating the digital platform and what further steps you need to take, and is this process completely dependent on and hindered by your need of financing?

Michael Little

Yes. So our priority as a company is to get New York open, to get the exhibitions or the exhibits in that space, and then obviously enhancement—further enhance digitally some of the—whether it be Titanic, Bodies or any other properties that we’d put up in New York. But it’s all priorities and it’s all about how much money ultimately that comes into the company and how we prioritize and do ROIs on each of these things on how we’re going to spend this money.

Andrew Shapiro – Lawndale Capital Management

Right, okay. Now you guys have spent some money and had talked in the past with 3Q1 2015 you were launching the King Tut ecommerce website with the intent of maximizing revenue from that exhibit. Has that website succeeded in doing that?

Michael Little

Overall, the Tut show has been very successful, and the spend on that was very minimal, so we continue to manage our cash and what we’re investing in, and we have large investments and smaller investments. Launching a King Tut website was a minimal spend, and yes, it’s been successful. The overall (indiscernible) has been—we’ve been very pleased on our results in Kansas City, not just on the e-platform, on selling merchandise. Overall, we’ve been pleased with it.

Andrew Shapiro – Lawndale Capital Management

Okay. Let me back out. I’ve asked a lot of questions this last round because no one else has stepped up, but let me back out and let anyone else ask. But please come back – I’ve got more for you.

Michael Little

Okay.

Operator

Again, star, one for questions.

We’ll have a question from Jonathan Heller, private investor.

Jonathan Heller

Yes, good morning. Thanks for the call again. I’ve been a long time shareholder and getting long time frustrated, as are most people. I know you guys are trying to do the right thing. I have a question regarding the appraisal that is going on now and the announcement today that you may not make the results public. Just trying to understand the rationale there and if you, when you made that announcement, implied within that announcement was that—you didn’t come out and say it, obviously, but implied within that was that the appraisal may be more favorable than the last one that you did. So now to come out and say that we may not make the results public, what’s the rationale behind that? You’re just going to send a terrible signal to whatever interest is left in the company if you don’t announce the results.

Michael Little

We understand. That will be a board decision, and obviously we will advise our board on what our shareholders are asking for, and it ultimately comes down to their decision on whether they make it public or not. But we absolutely hear what you’re saying, that your view is to make it public.

Jonathan Heller

Absolutely. If you don’t make it public, the assumption is going to be that the appraisal came in under what you expected, or certainly under the last appraisal. But part of this is certainly PR, and I will hop back in the queue. Andrew?

Operator

Again, star, one for questions.

We’ll go back to Andrew Shapiro, Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Hi. I couldn’t agree with Mr. Heller more – you definitely should be releasing whatever information that the appraisal has to help support the information gap that exists here, especially on such a hard to value asset. You spent all this money—you spent all this shareholders’ money on an appraisal, and you’re dealing with management’s statements, the values being in excess of what’s being priced in the marketplace, and so many times sale transactions or other strategic alternative transactions I think probably rely too much on a premium percentage to what the stock’s—you know, arrested trading price of the stock, that it’s an injustice and a disservice to the shareholders to not provide us any and all information on the appraisal or any of the other work that you do.

Michael Little

Andrew, as I said, I’m not saying that the board won’t, just the decision has not been made yet.

Andrew Shapiro – Lawndale Capital Management

I hope the board members are listening.

Michael Little

I’m certain they are. I also need to let you know we have time for about one more call, because it is coming up on 9:30 when the markets open, so if you have one more question I’m happy to take it.

Andrew Shapiro – Lawndale Capital Management

What steps are the board and management planning to take to ensure that Premier stays listed? The stock’s been trading below a dollar since before the last earnings call.

Michael Little

So we are certainly aware of our delisting—or we are certainly aware of the issue. Of course the best thing to do for shareholders is for the business to improve and the stock price to increase organically, but the board is well aware of the time constraints so the board is considering all options available and will submit a plan to NASDAQ to regain compliance.

Andrew Shapiro – Lawndale Capital Management

Okay. Why is there some need—with all kinds of conference calls occurring during market hours, why—are you guys trading stock or something? Why is there a need that the call has to end before the market opens?

Michael Little

Andrew, we reserved an hour for this call, and we’re up on that one-hour mark.

Andrew Shapiro – Lawndale Capital Management

Okay, well I’ve got more questions. I hope you’ll be able to answer them.

Michael Little

Andrew, may I suggest that you just call me directly and I’m happy to discuss further.

Andrew Shapiro – Lawndale Capital Management

Yes, that’s what we’ll do.

Michael Little

Okay, thank you.

Operator

We have no further questions in the queue. I’ll turn the conference back to Mr. Little for any additional or closing remarks.

Michael Little

Thank you everyone, and we will continue to focus on the operating business. We’re certainly expecting to get this funding in place here shortly. Have a good day.

Operator

That does conclude today’s conference. Thank you for your participation.

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