Premier Exhibitions' CEO Discusses F1Q13 Results - Earnings Call Transcript

| About: Premier Exhibitions, (PRXI)

Premier Exhibitions, Inc. (NASDAQ:PRXI)

F1Q13 Earnings Call

July 12, 2012 9:00 am ET


Samuel S. Weiser – President and Chief Executive Officer

Michael Little – Chief Financial Officer and Chief Operating Officer


William Vlahos – Odyssey Value Advisors LLC


Good morning and welcome to the Premier Exhibitions’ Fiscal Year 2013 First Quarter Earnings Results 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. These forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties and are not guarantees for 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 conditions.

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

Samuel S. Weiser

Thank you, operator, and good afternoon everyone. As the operator stated, we remind everyone that today’s conference call may contain forward-looking statements, which are based on our current expectations and are subject to risks and uncertainties.

In addition, today we will discuss adjusted EBITDA, a non-GAAP financial measure, which our company uses as a key metric for evaluating performance internally, and which also provides investors additional information to facilitate the comparison of past and present performance. A detailed explanation of this non-GAAP measure can be found in our earnings release and Form 8-K filed today with the SEC.

I would like to begin with a discussion of our business and afterwards, I will turn the call over to Michael Little, our Chief Financial Officer and Chief Operating Officer to review our financial performance in greater detail. In our view, fiscal 2013 should be an exciting year for our business. First, we look forward to completing the sale of the Titanic assets. Second, we are beginning to realize the benefits of prior year cost saving and management initiatives. Lastly, we are building our operating business both organically and through acquisitions to position the company for sustainable profitability quarter-to-quarter.

Our first quarter results indicate that we are off to a pretty good start in building a platform for sustainable top line growth and profitable ongoing operations. As the first quarter results suggest, we made progress along several different fronts including increasing revenue, expanding gross profit, generating substantially more operating cash flow, and diversifying our exhibition portfolio.

Our acquisition of AEI has solidified Premier as the industry leader in the development and exhibition of unique content for education, entertainment, and brand extension. The integration of AEI is progressing smoothly and a number of the new content opportunities we obtained are quickly taking shape. While many of these projects will require a time, we expect that this new content will be accretive to earnings in fiscal 2014.

In the meantime, we are exploring ways to extract additional revenue from the existing properties we acquired, which coupled with the management fees we earn under our agreement with AEG will be accretive to the company in this fiscal year.

The AEI acquisition immediately diversified our exhibition portfolio. Additionally, we believe the revenue potential embedded in the content of the Tut, Cleopatra, Real Pirates and America I Am brands can be more fully exploited by the combined enterprise. The AEI transaction also added experienced professionals who brought strong industry relationships and compelling new exhibition opportunities to our organization that we believe will fully demonstrate our industry leadership and help us to transform the exhibition industry.

The new fiscal year also introduced a new strategic vision for Premier. One in which we intend to extend the exhibition experience beyond the four walls of the exhibition hall. We are pursuing digital strategies that will deliver our content in varied ways to multiple constituencies of consumers. Many of these new strategic initiatives will be introduced this year, and should also be accretive to our bottom line. We are also focused on continuing to build our core business by introducing Premier and AEI to content owners, looking to expand their brands through join ventures and other licensing arrangements.

Furthermore, we are open to exploring other strategic acquisition opportunities that are accretive to our business along with fee-for-service arrangements with content owners looking to develop, construct and tour exhibitions built around their content.

Bookings for existing exhibitions and the newly acquired properties have been strong. Our calendar has fall and we continue to see demand for our unique content. Our business model is unique with both touring and semi-permanent installations. Our semi-permanent installations in Los Vegas, New York, Orlando and Atlanta continue to provide significant contributions to our gross margin.

Our recently acquired venue in Orlando has shown increasing attendance trends and drastically improved the merchandise sales. While the 100th anniversary didn’t hurt, our marketing in Orlando is beginning to create awareness of the venue as a destination, which should keep these attendance trends in tact.

The touring segment of our business was also strong, as our Titanic shows benefited from the 100th anniversary of Titanic’s inaugural and only voyage. As Michael explained, the results in our second quarter will better reflect the strength of the attendance at our touring exhibitions during the first quarter.

Going forward, bookings for our new content opportunities as well as our Titanic, Bodies, and the AEI properties will be dependent upon the expected revenue opportunity, the risk retained by the company, and the commitment of our partners.

One last item concerning our exhibition business. Over the past quarter, we begun introducing some of the amazing intellectual property developed from expedition 2010 into several of our Titanic exhibitions. In addition, we are reaching the completion of the Titanic mapping project with our partners in Michigan State Universities, Department of Geology. the intellectual property developed through this project has significant commercial applications and should be the backbone for many of our digital initiatives.

As activities related to the sale of the Titanic assets continue, we are managing the company with the philosophy of business as usual. We continue to look for new revenue streams, new distribution outlets, new merchandising opportunities, and most importantly, new opportunities in the digital round. Again, our goal is to achieve sustainable profitability quarter-to-quarter and year-to-year.

Before I turn the call over to Michael, I would like to comment briefly on the ongoing sale process related to the Titanic assets. As we have stated previously, we remain in discussions regarding the potential sale of these assets. the issues involved are complex and our discussions must remain in strict confidence to protect the integrity of the process. As a result, like on our prior investor call, we will not entertain any questions regarding the asset sale.

However, to repeat what I said just a few weeks ago, our board has committed to monetizing the Titanic assets, and we intend to do so in a tax efficient, judicious, and disciplined manner recognizing the appraised value of the artifacts and the intrinsic value of the other Titanic assets.

In addition, when a transaction is completed, we do intend to direct substantially all of the net proceeds to shareholders. As a group, our directors control approximately 50% of the company’s shares and are focused on maximizing shareholder value. As a board, our interests are clearly aligned with our shareholders.

I will now turn the call over to Michael who will discuss the financial results. After Michael concludes his remarks, we will be happy to take your questions. So, please limit yourselves to issues regarding our first quarter 2013 results, the AEI acquisition, and business performance only. Michael?

Michael Little

Hello everyone, thank you for joining us today. I wanted to begin by congratulating Sam on being named President, permanent President and CEO of Premier. Having worked with him over the past year, I can say with confidence that he is committed to making the company a successful organization for the long-term and successful leadership capabilities, skill sets and experience to execute on our strategic plan. I look forward to continue working with him for the benefit of all of our shareholders.

And now, let’s focus on our financial highlights for the first quarter. For the three-month period ending May 31, total revenues increased 18% up to $11.5 million from $9.7 million last year. Our top line benefited from an increase in the number of exhibitions and operating days as well as higher average attendance.

In addition, we also generated higher merchandise sales compared to the year-ago period and realized a modest management fee related to the AEI transaction from the period between April 20 and May 31, which is actually a new revenue stream for Premier. These factors were however, slightly offset by lower average ticket price.

The growth in gross profit was driven by the increase in the exhibitions and merchandise revenue, and increased 13% to $6.3 million from $5.5 million. This of course, slightly outpaced revenue growth. Gross profits for the quarter on the Titanic brand accounted for 75% or $4.7 million of the $6.3 million in gross profits. The remaining $1.6 million was generated by the Bodies brand and the management fees.

Adjusted EBITDA for the quarter was positive of $2.3 million. Net income was $1.2 million or $0.02 per diluted share on a share base of $49.1 million, which compares to $1.1 million or $0.02 per diluted share in the first fiscal quarter of 2012 on a share base of $48 million.

Taking into our performance a little deeper, exhibition revenue increased 3.7% to $9 million from $8.7 million in the year-ago quarter. We had 148 more operating days, that’s a 12% increase compared to last year. In addition to the 9.8% increase in daily average attendance, which was largely related to the Titanic’s 100th year anniversary, the addition of the two new Titanic exhibitions, the one new Bodies exhibition, and the result of our stepped-up marketing and advertising efforts.

In total, we had approximately 824,000 in attendance during the first quarter of fiscal 2013, which compares to approximately 669,000 in the first quarter of fiscal 2012. Our average ticket price fell 7.6% versus the prior year, and this was due to our exhibition mix being more heavily weighted in museums compared to last year’s exhibition mix.

The reason why paid attendance increases are not generating additional revenue in the first quarter is the result of our profit share participation in our museum/venue agreements. In the coming second quarter with strong year-to-date performance with our Titanic exhibitions in Detroit, San Diego and Kansas City, we will realize higher profit share income from those venues. We had 18 exhibitions presented in the first quarter of 2013, comprising of six stationary exhibitions and 12 touring exhibitions and we managed the four AEI properties: King Tut, Cleopatra, Real Pirates, and America I Am. That compares against the 17 exhibitions in the same period last year, which five are stationary and 12 are touring.

It is worth noting that we generated $853,000 in ticket and merchandise sales from the Titanic exhibit in Orlando that we acquired late last year. The cost of exhibition revenue increased 14% to $4.4 million compared to $3.8 million in the first quarter of fiscal 2012, which was mostly the result of the significant increases in our marketing and advertising spends versus prior year.

As we referenced on our prior call, and our (inaudible) dropped dramatically, reduced expenses in the fiscal 2012. we underfunded our marketing budgets and have therefore increased our expenditures in fiscal 2013 to more normalized levels in order to drive current and future revenue in attendance.

Merchandise sales more than doubled to $2.3 million during the first quarter of fiscal 2013 from $1.1 million in this year-ago period. The total increase was primarily the result of higher attendance in per caps. Online merchandise sales on our e-commerce website, and special events with a direct response marketer and online television retailer to produce, market, and sell Titanic-themed merchandise.

Items included commemorative jewelry, houseware, fragrances, and other Titanic-themed merchandise inspired by or replicated based on authentic artifacts. At our venues in the first quarter, on a per person basis, our average spend on merchandise was up 47%.

Turning to G&A expense, it increased 15% to $3.9 million compared to $3.4 million in the first quarter of fiscal 2012. The increase was due to higher professional fees related to the AEI transaction, severance and bonus related expenses. We estimated non-recurring items within the G&A expense was approximately $450,000 during that period.

In total, we expect to incur approximately $575,000 in the AEI transaction related expense for investment banking, legal, accounting fees. And in the first quarter, $325,000 has been incurred. Depreciation and amortization expense in the first quarter decreased a $141,000 to $914,000, which is attribute to the assets being fully depreciated or amortized.

Finally, on our P&L, income from operations in the first quarter improved $351,000 to $1.4 million from $1.1 million in the period year ago. This was primarily due to the $1.7 million in higher revenue, which I mentioned earlier offset slightly by the $1 million in higher cost of revenues and the $300,000 and transaction related expenses, which is embedded in the G&A expense.

In terms of the balance sheet, cash and marketable securities combined were at $5.1 million on May 31, which reflects a healthy increase from the same point last year as we have focused on building our cash reserves. You should note that our operating cash flows have more than doubled to $2.5 million from $1.2 million. We believe that our expected cash flows from operations together with our existing cash will be sufficient to meet our anticipated cash needs for working capital requirements, debt obligations, and capital expenditures for the next 12 months.

So in summary, I think it’s clear that we’ve made substantial progress and improving our core business in both strategically as well as financially. We are now better positioned than we have been in the long time, and we look forward to what should be an exciting year at Premier.

Operator, with that, I’m happy to open it to questions.

Question-and-Answer Session


Thank you. (Operator Instructions) We will take our first question from David Daggett, Private Investor. Go ahead please.

Unidentified Analyst

Hi, could you tell me if the $1.2 million income for the first quarter, does that include non-recurring expenses from the AEI transaction or has that been excluded from that $0.02 of share gain?

Michael Little

The $1.2 million includes that expense.

Unidentified Analyst

So with that $9 million you could see, so it's actually better than that, would be more like $0.03 of share if that were to be removed.

Michael Little

That is correct.

Unidentified Analyst

Thank you.


(Operator Instructions) Our next question comes from Bill Vlahos with Odyssey Value. Go ahead, please.

William Vlahos – Odyssey Value Advisors, LLC

Thank you. Yeah, Sam I got a question for you, referring to yesterday’s press release. You refer...

Samuel S. Weiser

I hope that supposed to be Odyssey (inaudible)

William Vlahos – Odyssey Value Advisors, LLC

Pardon me.

Samuel S. Weiser

Go ahead, Bill. Go ahead, Bill.

William Vlahos – Odyssey Value Advisors, LLC

Okay. You referred to positioning the company to move forward following the monetization of the Titanic assets. So I’m not going to ask you about the sale, but I’m going to ask you about your awarding. I mean that's a pretty unambiguous and direct comment you're not talking about if the Titanic assets are sold them. you’re saying that these assets are being sold, and you used similar language in your July 3 call. So I just want to get a little clarity about that comment, I mean do you stand by those words if these assets are going to be sold?

Samuel S. Weiser

Yeah. Bill, unfortunately, as we said, I can’t comment on that. I think everything that we have said to this point has been accurate and complete, and consistent with what’s going on in the process, all of our past PR, and all of our past comments reflect, what we believe is appropriate and consistent with disclosure to our shareholders. So that’s all I can say, but I appreciate the question, but unfortunately, we really can’t comment on the process.

William Vlahos – Odyssey Value Advisors LLC

I'm not – I’m just asking the comment what you’ve said. so I would assume that the Board and your Legal Counsel was comfortable with your quote and what you’ve said in yesterday’s press release?

Samuel S. Weiser

As I said, our releases have been consistent. We obviously know what we say, and what we say reflects what is actually going on with the process. So we stand behind our words and that’s all we can say at this point.

William Vlahos – Odyssey Value Advisors LLC

Okay. You stand behind your words. Okay. that’s all I want to hear.


(Operator Instructions) And it appears we have no more questions at this time.

Samuel S. Weiser

Well, there are no more questions, I appreciate everybody’s time, and appreciate you joining us today. And I look forward to speaking to you hopefully sooner than next quarter. All right, thank you very much.


This does conclude today’s teleconference. You may disconnect.

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