Transcript Document

A Peek Into The Future of Theatrical Exhibition
NASDAQ: DCIN
www.digiplexdest.com
Forward-Looking Statements
Certain statements and estimates in this presentation are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example,
statements about: expected benefits from the conversion to digital cinema; and the Company’s
ability to successfully pursue its strategies. These forward-looking statements are not guarantees
of future performance. They are based on management's expectations that involve a number of
business risks and uncertainties, including the risks set forth under the heading “Risk Factors” in
our 10-K for the year ended June 30, 2013, any of which could cause actual results to differ
materially from those expressed in or implied by the forward-looking statements. Any estimates
or other forward-looking statements provided in this presentation speak only as of the date they
were made, and, except to the extent required by law, we undertake no obligation to update or
review any estimate and/or forward-looking statement because of new information, future
events or other factors.
2
Investment Highlights
 Growth Story: Fastest growing public company in the theater exhibition space
 Revenues have risen approximately 167%, year-over-year in calendar 2013 vs 2012
 Potential for multiple expansion as DCIN grows in size and trading float and liquidity further improve
 Strong Acquisition Pipeline: Favorable M&A landscape in the theater exhibition industry
provides wealth of opportunities
 Management has relationships, dialogues, and business history with a vast number of theater owners / prospective
acquisition candidates
 Content Play: Emphasis on alternative content provides innovative strategy to drive
incremental growth and improve capacity utilization
 Focused on acquiring proprietary content that can drive customers to theaters at non-peak times
 Experienced Management Team: Executive team of industry veterans provides outsized
experience and knowledge base relative to Company size
 Pioneers in the digital cinema industry (Clearview / Cinedigm legacies)
 Most of the current management team has worked together for over a decade at previous enterprises
 Strategic Alliances: Digiplex has meaningful relationships with key industry players and
vendors, providing material credibility at still early growth stage
3
Industry Overview
4
Long-Term Industry Box Office Success and Stability
Cinema Has Performed Well Over Decades
 2013 marks the second consecutive year
the domestic box office broke the all-time
record, for a total of $10.9 billion
 Stable industry with consistent pricing
power, despite technological advances
U.S. Annual Box Office Performance (billions $US)
$12
$11
$10
2013
$10.9
5% Box Office CAGR* (1970-2013)
$9
$8
$7
$6
$5
 Inexpensive out-of-home entertainment
option typically resilient to economic
pressures
$4
$3
$2
$1
2013
2009
2005
2001
1997
1993
1989
1985
1981
1977
$0
1973
 Average ticket price has grown from $5.66
in 2001 to $8.05 in 2013
Commercial Penetration of New Media Forms “Competing” With Box Office:
Cable
VCR
Internet
DVD
Sources: Box Office Mojo, Box Office Magazine
5
Film Remains the Most Popular and
Affordable Out-of-Home Entertainment
$350
$300
Average Cost
$250
$200
Theme Parks
$150
$100
$50
Cinemas
$-
200
400
600
800
1,000
Popularity (Attendance)
1,200
1,400
Source: MPAA – Theatrical Market Statistics, 2012
6
Corporate Strategy
7
Strategic Overview
 Acquisition Plan: Opportunistically expand Digiplex’s national footprint by
identifying and acquiring solid performing theaters in accretive transactions at
reasonable cash flow multiples (approx. 4.5x – 6x, including initial CapEx)
 Improve the Theater-Going Experience: Further enhance acquired locations with
additional investments in digital technology and focus on customer enjoyment
 Increase Utilization: Drive theater-level utilization rates with proprietary and
alternative programming to attract targeted niche customers to events at off-peak
times when attendance is traditionally very low
 Long-term Goals:
 National Footprint: 100 theaters/1,000 screens in 75/100 top market areas
 Become a media company: As the platform grows, DCIN will be increasingly focused on pushing
proprietary content through its platform and to other non-owned affiliates
 Goal of alternative content reaching 20% of total revenue at high margins, with minimal risk
8
Screen Acquisition Landscape
Favorable Industry Trends
Approximately 40,000 Screens Domestically
~ 20,000
Owned by Top 4 Exhibitors
(AMC, Regal, Cinemark, Carmike)
~8,000
Regional
Circuits
~12,000
Disaggregated
Independents
 Industry has a significant number of smaller-scale
regional and “Mom n’ Pop” theater owners
 Ongoing digital conversion of domestic screen base
requires significant investment on behalf of owners to
stay relevant; often exceeding capital access
 These factors have produced significant opportunities
in the acquisition pipeline
Disciplined Approach
 Price: ~4.5x-6x Theater-Level Cash Flow
Our Opportunity:
We believe that there is a substantial number of
theaters within this subset of screens that are
ripe for acquisition. We seek acquisition
candidates that fit the following:
• Cash Flow Positive
• High Quality Assets
• Located in Top 100 DMA
• Owners Seeking Exit Opportunity
 Includes initial CapEx
 Location: methodical targeting of free zones in top100 market areas
 Focus on creating media distribution network
better tailored to local tastes
 Early stage of roll-up allows us to be more
opportunistic than our competition
geographically
9
Digiplex Footprint Overview
 Current Footprint:
 20 Theaters / 192 Screens
 Located in seven states (AZ, CA, CT, MD, NJ, OH, PA)
 75% of Digiplex’s 20 locations are in top 30 DMAs
 100% digital screen base (including 35-40% 3D capable)
 Pro forma Footprint (based on announced theater signings to date):
 23 Theaters / 226 Screens
 Located in nine states (AZ, CA, CT, FL, MD, NH, NJ, OH, PA)
 ~80% of Digiplex’s 23 locations will be in top 30 DMAs
 100% digital screen base (including 35-40% 3D-enabled)
 Long-Term Goal: Grow to become a national circuit featuring 100 theaters / 1,000 screens in 75 of the
Top 100 DMAs
 Will have grown more than 11-fold in the nearly two years since IPO (including all announced
transactions)
 Additional Positives:
 Joint Venture with Start Media has been a successful acquisition vehicle
 The size of DCIN’s footprint allows for better acquisition opportunities (independently owned
theaters at preferred purchase multiples, with frequent stock component)
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Digiplex Transaction History
State
Acquisition Date
# of Theatres
# of Screens
Transaction
Value ($MM)
TTV/TLCF
TTV/Screen
Westfield, Cranford
NJ
31-Dec-10
2
11
$1.80
ND
$163,636
Transaction 2
Bloomfield 8
Bloomfield
CT
17-Feb-11
1
8
$0.10
1.0x
$12,500
Transaction 3
Cinema Centers
Bloomsburg, Camp Hill, Reading,
Selinsgrove, Williamsport
PA
20-Apr-12
5
54
$13.90
4.8x
$257,407
Transaction 4
Lisbon
Lisbon
CT
29-Sep-12
1
12
$6.60
6.0x
$550,000
Transaction 5
UltraStar*
Surprise, Apple Valley, Oceanside,
Temecula, Poway, San Diego, Bonsall
AZ, CA
11-Dec-12
7
74
$12.80
5.0x
$172,973
Transaction 6
Sparta
Sparta
NJ
6-Jan-13
1
3
ND
ND
ND
Transaction 7
Solon
Solon
OH
1-Feb-13
1
16
ND
ND
ND
Transaction 8
Torrington
Torrington
CT
19-Jul-13
1
6
$0.60
ND
$105,751
Transaction 9
Flagship
Mechanicsburg, Churchville
PA,MD
19-Dec-13, 7-Mar-14
2
15
$4.00
5.0X
$266,666
Transaction 10
O'Neil Cinemas
Londonderry
NH
TBD
1
10
ND
ND
ND
Transaction 11
Cheswick Theaters
Sarver
PA
TBD
1
10
ND
ND
ND
Transaction 12
New Smyrna Beach
New Smyrna Beach
FL
TBD
1
12
ND
ND
ND
Theatre
Location
Transaction 1
Railto / Cranford
* DCIN s ubs equently s ol d i ts 7-s creen Mi s s i on Va l l ey, Sa n Di ego thea ter ba ck to a n Ul tra Star a ffi l i a te i n 2/14. The cons i dera tion wa s s i mi l a r to the ori gi na l purcha s e pri ce.
Note: Rows highlighted in blue indicate closed transactions. Rows highlighted in grey indicate announced transactions.
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Improve Utilization: Alternative Programming
 Strategy: Schedule wide range of alternative programming, building awareness and attendance gains through active
targeted marketing and comprehensive social media customer engagement initiatives
 Long-term goal: Generate 20% of total revenues from alternative content, improving attendance metrics at ~50%
higher ticket price…replacing underperforming Hollywood titles on screen
 Progress Update: Continuing to introduce DCIN’s alternative programming, targeted marketing platform, and active,
low-cost social-based outreach strategies that were successfully implemented in its first locations to its newly
acquired facilities
 Alternative programming as a % of total fiscal Q2’14 admissions revenues averaged 4% at all locations, not just
those that were owned for longer periods of time. This far exceeds other circuits’ published data.
Procure Content
 A diverse range of programming that
appeals to wide array of audiences
Schedule Programming
 Ideally Mon.-Thurs., when average
cinemas operate at <10% capacity
 Digital content allows for timely and
targeted schedule and content
optimization
Market Events
 Create awareness/interest through
DCIN’s consumer engagement
initiatives: customer targeting,
relationship building, fostering a
two-way dialog with guests
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Improve Utilization:
Alternative Programming Successes
Sample Content and Event Grosses
Alternative programming consistently outperforming lowest
(and often highest) grossing movies…at higher prices
Day of
the Week
Monday
Event Offered
Opera Encore: Die Walkure
Movie Classic: Star Trek 25th Anniversary
Opera Encore: Wagner’s Dream
Event Gross
that Day
$453
$911
$389
Highest Grossing
Movie that Day
$250
$284
$360
Lowest Grossing
Movie that Day
$0
$169
$0
Event Ticket
Price (1 adult)
$12.50
$12.50
$12.50
Tuesday
Ballet: Nutcracker Live
Concert: Rolling Stones Live in 1978
Ballet: Le Corsaire
$1,345
$672
$566
$125
$90
$125
$0
$9
$0
$20.00
$12.50
$15.00
Wednesday
Broadway: West Side Story
Broadway: Love Never Dies
Opera: La Traviata
$2,425
$1,422
$1,340
$73
$108
$93
$56
$0
$0
$12.50
$12.50
$20.00
Thursday
Movie Classic: Singin’ in the Rain
Art Show: Leonardo Live
Movie Classic: Singin’ in the Rain
$2,603
$1,592
$955
$608
$272
$235
$48
$20
$28
$12.50
$12.50
$12.50
Saturday
Opera Live: Don Giovanni
Opera Live: La Traviata
Sports: Mayweather vs. Ortiz
$7,073
$3,850
$1,817
$530
$1,169
$2,037
$21
$48
$44
$25.00
$12.50
$18.00
Sunday
Opera Live: Phantom of the Opera
Ballet: Le Corsaire
Los Angeles Philharmonic
$1,104
$976
$479
$282
$309
$309
$28
$8
$8
$18.00
$15.00
$18.00
$783.31
$497.05
$76.41
$15.01
Averages:
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Conceptual Overview:
Alternative Content to Drive Utilization
Weekly Box Office Contribution (Historical)
Goal for Alternative Content
30%
 Long-Term Goal: Achieve 20% Box
Office Contribution from Alternative
Content
 High Margin / Low Risk
25%
 Benefits of Alternative Content:
20%
 Drive incremental weekday
attendance
15%
10%
 Smooth out the daily demand curve
5%
 Generate attractive admission
premiums
0%
Mon
Tues
Wed
Thurs
Fri
Sat
Sun
Source: BoxOfficeMojo.com, 2012 daily domestic box office data
 Longer-term downstream revenue
opportunities
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Using Digital Technology to Serve Diverse Audience
 DigiNext Value-Creation Opportunity
 Unique, specialty content joint venture with Nehst Studios featuring a curated series of documentaries and indie features (hand-selected
from world’s leading film festivals) shown on Digiplex circuit and at friendly, non-competing theaters
 Forged unique alternative content distribution alliance with cinema advertising giant

potential platform of 14,000+ Screenvision theater network auditoriums across the US
 DCIN receives 50% of all net downstream/ancillary revenues including DVD, digital downloads and international broadcast rights
 Additional features and unique benefits of DigiNext:
 Opportunity for innovative live Q&A between audience and cast members
 Affordable pricing ($7.00 per ticket, or $6.00 if 5-title subscription purchased)
 ‘Pay it Forward’ – a charitable program allowing Digiplex patrons to give back to their community
 ~Ten releases/year (excluding high-traffic ‘holidays’)
February 2013
March 2013
April 2013
August 2013
December 2013
 Leveraging digital technology in innovative ways to enhance entertainment options
 Select DCIN theater locations have started presenting special engagements of major Hollywood movie releases with both Spanish and English
sound tracks
 Participating locations include, Apple Valley and San Diego, CA, and Reading, PA
 DCIN plans to expand this entertainment option to include more locations and to feature Asian and other foreign language presentations in
addition to Spanish
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Experienced Management Team of Industry Pioneers
Digiplex Corporate Officers
 Bud Mayo, Chairman and CEO (Board Member): Industry veteran with over two decades of experience. Previously,
Bud founded and led both Cinedigm Digital Cinema Corp., the pioneer and leader in digital cinema, and Clearview
Cinema Group, a top U.S. theater circuit. In recognition of his efforts within the industry, Bud received the distinct
honor of being inducted into the film exhibition Hall of Fame at the industry's 2010 ShowEast conference.
 Brian Pflug, CFO (Board Member): Former Controller at Clearview Cinemas and former SVP of Accounting and Finance
at Cinedigm Digital Cinema Corp. Mr. Pflug has worked with Bud Mayo since 1998, when Brian was controller at
Clearview Cinemas. The two then worked together at Cinedigm Digital Cinema Corp. where Brian rose to senior vice
president of Accounting and Finance, his most recent position before Digiplex.
 Chuck Goldwater, Executive Vice President (Board Member): Industry veteran with over two decades of experience.
Former CEO of Digital Cinema Initiatives, the major studio consortium that set digital standards; and was the former
Head of Cinedigm’s digital cinema unit. Chuck has held senior management positions at a number of leading theater
exhibitors including USA Cinemas, National Amusements and Loews Theatres, and he served as President/CEO of
Mann Theatres and President at Clearview Cinemas.
 Jeff Butkovsky, Chief Technology Officer: Jeff has an extensive background in digital cinema and over 25 years in
technology management, software development and technology sales. He was Cinedigm Digital Cinema Corp.’s Senior
Vice President and Chief Technology Officer from October 2000 to July 2010.
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Case Study: Clearview Cinemas
 Bud Mayo co-founded Clearview with four theaters and sold the company to Cablevision four years later
 Attractive exit price for IPO investors:
Share Price Aug 21, 1997 (market open):
$ 8.00
Sold for Share Price Dec 8, 1998 (on or about 12/8):
$24.25
Hold Time (# of days):
~ 474
Return on Investment (approximate):
233%
Clearview Cinemas Corporate Timeline
1995: Acquired 3
theaters and 11
screens
1994
Sep. 1994: Co-founded
by Bud Mayo with 4
theaters and 8 screens
1995
Dec. 1994: Received
equity from CMNY
Capital and added 3
screens
1996: Acquired 9
theaters and 39
screens
1996
May 1996: Received
equity investment of
$4.5M from MidMark
Capital
Aug. 1997: IPO – Sold
1.15M shares for $9.2M
gross
Jan. – Sep. 1998: Acquired 11
theaters and the right to
operate one theater for a total
of 54 screens
1997
1997: Acquired 14 theaters with
79 screens, added 6 screens to
acquired theaters and
constructed a 5-screen theater
1998
Dec. 1998: Sale to Cablevision
(NYSE: CVC) for $160M, including
New York City’s Ziegfeld Theatre
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS: The above information is presented solely for informational purposes, and no representation, warranty or guarantee is being made relative to the
future performance of the Company or the trading price of its Class A common stock whatsoever.
17
Key Strategic Partnerships
Joint Venture Partner
•Up to $20MM in
acquisition capital
•Alternative Content
Distributor
On Screen Advertising
Partner
•14,000 screen network
•($0.17 per patron, ~50/50 split)
•Content through Fathom
Specialty Content JV
Point-of-Sale Software
•Integrated with EMS and ERP
•Provides documentaries and
indie features
Exhibitor Management
Services Platform
Negotiating Partner with Film
Distributors
•EMS tracks ticketing, receipts,
revenue, payments, scheduling
•Monthly flat fee for license fee
negotiations
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Start Media Joint Venture
 Formation: December 10, 2012
 Purpose: To acquire, refit and operate movie theaters
 Start Media has committed to contribute up to $20 million.
 Agreement:
 JV is managed by a four person board of managers (equal representation)
 As of December 31, 2013, Digiplex and Start Media owned 33% and 67% of the equity of JV, respectively
 JV has a first right of refusal to acquire any theaters DCIN wishes to acquire, except for any theaters within
a ten mile radius of existing Digiplex owned theaters. If JV does not exercise its right of first refusal, DCIN
has the right to make the acquisition independently.
 Agreement for ten years, optional renewal of terms in 2022
 Progress Update:
 Digiplex has contributed Class A common stock valued at over $5 million
 Start Media has contributed approximately $10.3 million in cash to date
 Capital contributions were used for the UltraStar acquisitions, the Torrington theater acquisition, and
to fund anticipated capital expenditures for JV-owned theaters
19
Financials
20
Selected Financials and Operating Metrics
($ in thousands)
2013
2012
%∆
Admissions
Concessions
Other
Total revenues
7,590
3,166
440
11,196
4,752
1,929
189
6,870
59.7%
64.1%
132.8%
63.0%
Net Loss
(1,356)
(1,234)
9.9%
Gross Margin Analysis
Box office less exhibition costs gross margin
Concession gross margin
48.1%
81.6%
49.5%
83.6%
-1.4%
-2.0%
Consolidated Theater level cash flow (1)
1,943
1,553
25.1%
950
644
47.5%
Key Operating Metrics
Theatres (period end)
Total attendance (in thousands)
20
993
16
619
25.0%
60.4%
Average attendance per screen
5,367
6,459
-16.9%
Adjusted EBITDA of DCIN
(1)
Average admissions per patron
Average concession sales per patron
Total per patron spending
7.93
3.31
11.24
7.71
3.13
10.84
2.9%
5.8%
3.7%
(1) Consolidated Theater level cash flow and Adjusted EBITDA of DCIN are supplemental non-GAAP financial measures.
21
Selected Financials and Operating Metrics
December 31,
2013
June 30,
2013
Assets
($ in thousands)
Cash and cash equivalents
Accounts receivable
Inventories
Deferred financing costs, current portion
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Security deposits
Deferred financing costs, long term portion, net
Other assets
Total assets
December 31,
2013
June 30,
2013
Liabilities and equity
6,992
740
148
357
1,295
9,532
3,607
697
191
357
1,444
6,296
29,666
3,502
7,012
29,171
3,156
6,186
209
205
1,052
107
51,080
1,225
9
46,248
($ in thousands)
Accounts payable
Accrued expenses and other current liabilities
Notes payable, current portion
Capital lease, current portion
Earn out from theater acquisitions
Deferred revenue
Total current liabilities
Notes payable, long term portion
Capital lease, net of current portion
Unfavorable leasehold liability, long term portion
Deferred rent expense
Deferred tax liability
Total Liabilities
Preferred
Stock stock, $.01 par value: 20,000,000 shares
Class
A Common
authorized; and 7,035,058 and 5,511,938 shares issued and
Class B Common stock, $.01 par value, 900,000 shares authorized;
1,985
3,658
1,716
162
350
767
8,638
2,478
3,964
1,373
121
296
305
8,537
8,048
470
8,615
239
141
159
617
207
18,121
407
199
18,156
-
70
9
55
9
Additional paid-in capital
Accumulated deficit
Total Stockholders' Equity of Digital Cinema Destinations Corp.
32,959
(9,121)
23,917
25,816
(7,049)
18,831
Non-controlling interest
Total equity
Total Liabilities and Equity
9,238
27,620
51,080
9,261
28,092
46,248
22
Digiplex Model Summary – “Cinema Reinvented”
TRANSFORM
CONVERT & INVEST
ACQUIRE
 Cash flow positive theaters
 Top DMAs
 Pay reasonable cash flow multiples
(including initial CapEx)
 Convert analog systems
 Integrate into DCIN digital platform
 Add additional screens where
feasible/profitable
 Theaters to entertainment
destinations
 Innovative programming + social
media = increased seat utilization
(especially on slow weeknights)
 ex: Sporting Events, Opera,
Ballet
INCREMENTAL REVENUES
PRE-SHOW ADVERTISING
COST REDUCTIONS
 Software systems provide
flexibility/efficiency/lower expenses
 Virtual print fees (VPF) benefit
theater level cash flows, offsetting
film rent
 Participation on NCM national
pre-show ad network (19K+
screens)
 Generating guaranteed per
attendee minimum rate…or better
 Attendance gains lead to
enhanced concession revenues at
attractive gross margins (>80%)
 3D (36% of footprint is 3D
compatible)
 Alternative programming (~50%+
higher ticket prices)
 Ad revenues of 17¢ per patron is
NCM minimum guarantee
23
Investment Highlights
 Growth Story
 Strong Acquisition Pipeline
 Content Play
 Experienced Management Team
 Strategic Alliances
24