Ballantyne Strong Reports Second Quarter 2022 Operating

Strong Entertainment’s Studio Subsidiary Begins Production on First Project 

Charlotte, NC, Aug. 02, 2022 (GLOBE NEWSWIRE) — Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company” or “Ballantyne Strong”) today announced operating results for the second quarter ended June 30, 2022.

Operational Highlights

  Strong Entertainment’s business continued to strengthen as cinema audiences returned and a strong slate of studio releases fueled strong box-office performance
     
  Revenue momentum continued, growing 50% for the second quarter 2022 compared to the second quarter of the prior year
     
  Strong Studios commenced production of its first project, Safehaven, during second quarter 2022
     
  Registration statement filed publicly with the Securities and Exchange Commission for initial public offering of the Strong Entertainment business
     
  Deployed additional capital to FG Financial Group, Inc. (FGF) equity holding by participating in common stock offering
     

“We continued to see solid growth in our Strong Entertainment business as box office revenues surged and industry confidence continued to strengthen. Our recurring monthly revenue maintenance contracts are largely back to pre-COVID levels, and we are starting to see acceleration in capital investment from our cinema partners, including laser upgrades which we believe represent a multi-year investment cycle. Also, our exciting new Strong Studios division – which adds content to our Strong Entertainment business – began production of Safehaven, its first scripted series,” commented Mark Roberson, Chief Executive Officer.

Kyle Cerminara, Chairman of The Board, commented, “Our equity holdings – all attractively positioned in growing end markets – continue to execute well. We increased our position in FG Financial, Firefly continues to expand its offering around the globe and GreenFirst Forest Products recently reported a strong first full quarter as a public company. We remain focused on executing against our strategy to drive long-term value for our shareholders.” 

 Second Quarter 2022 Financial Review (Compared to Three Months Ended June 30, 2021) 

  Revenue increased 50.0% to $9.1 million from $6.1 million. Demand and revenue for products and services benefited from the continuing recovery in the cinema industry as restrictions eased and studios began accelerating the release of new content to the cinemas. Studios recently resumed releasing major movies to the cinemas and continue to have a backlog of content planned for release in 2022 and 2023.
     
  Gross profit of $2.4 million was relatively flat compared to $2.5 million. Gross profit margins were 26.5% as compared to 40.4%. Excluding the impact of employee retention credits, which favorably impacted the prior year period, gross profit during the quarter ended June 30, 2021 would have been 26.6% as compared to 26.5% in the current period. Gross profit dollars increased 49.6% excluding the employee retention credits as revenue increased with the reopening of cinemas and entertainment venues worldwide.
     
  Loss from operations was $0.9 million as compared to breakeven in the prior year. Excluding the impact of employee retention credits, which favorably impacted the prior year period, loss from operations during the quarter ended June 30, 2021 would have been $1.3 million. After excluding the prior year benefit from employee retention credits, operating results improved as a direct result of the rebound in revenues and gross margin in our Strong Entertainment business.
     
  Net loss from continuing operations was $5.6 million, ($0.29) per basic and diluted share, as compared to $0.4 million, ($0.04) per basic and diluted share in the prior year. The increase in net loss from continuing operations was primarily the result of unrealized losses on our equity holdings and employee retention credits recognized in the prior year.
     
  Adjusted EBITDA, which excludes the impact of unrealized losses on our equity holdings and employee retention credits, among other things, improved to negative $0.4 million as compared to negative $0.7 million in the prior year.

 Conference Call 
A conference call to discuss the Company’s 2022 second quarter financial results will be held on Tuesday, August 2, 2022, at 5:00 pm Eastern Time. Interested parties can listen to the call via live webcast or by phone. To access the webcast, visit the Company’s website at ballantynestrong.com/investors or use following link: BTN Webcast Link. To access the conference call by phone, dial (888) 348-6454 (domestic) or (412) 902-4211 (international). Please access the webcast or dial in at least five minutes before the start of the call to register.

A replay of the webcast will be available following the conclusion of the live broadcast and accessible on the Company’s website at ballantynestrong.com/investors

Use of Non-GAAP Measures 
Ballantyne Strong prepares its consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding Adjusted EBITDA (“Adjusted EBITDA”), which differs from the commonly used EBITDA (“EBITDA”). Adjusted EBITDA both adjusts net income (loss) to exclude income taxes, interest, and depreciation and amortization, and excludes discontinued operations, share-based compensation, impairment charges, equity method income (loss), fair value adjustments, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries, certain tax credits and other cash and non-cash charges and gains.

EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP. However, Adjusted EBITDA is used internally in planning and evaluating the Company’s operating performance. Accordingly, management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of the Company’s operations that, when coupled with the GAAP results, provides a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or to net cash from operating activities as measures of operating results or liquidity. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating the Company’s performance.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. Some of these limitations are: (i) they do not reflect the Company’s cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, the Company’s working capital needs, (iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in the Company’s statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters management considers not to be indicative of the Company’s ongoing operations, and (vii) other companies in the Company’s industry may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.

Management believes EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). The Company also presents EBITDA and Adjusted EBITDA because (i) management believes these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the Company’s industry, (ii) management believes investors will find these measures useful in assessing the Company’s ability to service or incur indebtedness, and (iii) management uses EBITDA and Adjusted EBITDA internally as benchmarks to evaluate the Company’s operating performance or compare the Company’s performance to that of its competitors.

For further information, please refer to Ballantyne Strong, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 24, 2022, available online at www.sec.gov.

About Ballantyne Strong, Inc. 
Ballantyne Strong, Inc. (www.ballantynestrong.com) is a diversified holding company with operations and holdings across a broad range of industries. The Company’s Strong Entertainment segment is the largest premium screen supplier in North America, provides technical support services and related products and services to the cinema exhibition industry, and recently launched its studio operations to produce content for streaming and other entertainment outlets. Ballantyne Strong holds equity stakes in Firefly Systems, Inc., GreenFirst Forest Products Inc. (TSX: GFP), and FG Financial Group, Inc. (Nasdaq: FGF), as well as real estate through its Digital Ignition operating business.

Forward-Looking Statements 
In addition to the historical information included herein, this press release includes forward-looking statements, such as management’s expectations regarding its portfolio companies, the Company’s intent to pursue an initial public offering and separate listing of its Entertainment business, as well as future sales, the impact, length and severity of the COVID-19 pandemic, general economic recovery from the effects of the COVID-19 pandemic, and the adequacy of the actions taken in response to the pandemic, which involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 24, 2022, and the following risks and uncertainties: the negative impact that the COVID-19 pandemic has already had, and may continue to have, on the Company’s business and financial condition; the impact on the global economy and supply chains of the ongoing military conflict in Ukraine and the sanctions related thereto; the Company’s ability to maintain and expand its revenue streams to compensate for the lower demand for the Company’s digital cinema products and installation services; potential interruptions of supplier relationships or higher prices charged by suppliers; the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological developments; the Company’s ability to successfully execute its capital allocation strategy or achieve the returns it expects from these investments; the Company’s ability to maintain its brand and reputation and retain or replace its significant customers; challenges associated with the Company’s long sales cycles; the impact of a challenging global economic environment or a downturn in the markets (such as the current economic disruption and market volatility generated by the ongoing COVID-19 pandemic and ongoing military conflict in Ukraine and related sanctions); economic and political risks of selling products in foreign countries (including tariffs); risks of non-compliance with U.S. and foreign laws and regulations, potential sales tax collections and claims for uncollected amounts; cybersecurity risks and risks of damage and interruptions of information technology systems; the Company’s ability to retain key members of management and successfully integrate new executives; the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms, or at all; the impact of the COVID-19 pandemic on the Company’s portfolio companies; the Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events (such as the ongoing COVID-19 pandemic and ongoing military conflict in Ukraine and related sanctions); the adequacy of insurance; the impact of having a controlling stockholder and vulnerability to fluctuation in the Company’s stock price. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Many of the risks listed above have been, and may further be, exacerbated by the ongoing COVID-19 pandemic, its impact on the cinema and entertainment industry, and the worsening economic environment. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update, withdraw or revise any forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

For Investor Relations Inquiries:

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par values)
             
      June 30,
2022
      December 31,
2021
 
      (unaudited)          
Assets                
Current assets:                
Cash and cash equivalents   $ 4,411     $ 8,731  
Restricted cash     150       150  
Accounts receivable, net     5,701       4,631  
Inventories, net     3,834       3,271  
Other current assets     4,926       4,992  
Total current assets     19,022       21,775  
Property, plant and equipment, net     13,927       6,226  
Operating lease right-of-use assets     262       3,975  
Finance lease right-of-use asset     66        
Note receivable, net of current portion           1,667  
Equity holdings     38,498       41,133  
Film and television programming rights, net     1,379        
Intangible assets, net     11       69  
Goodwill     927       942  
Other assets     5       22  
Total assets   $ 74,097     $ 75,809  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
Accounts payable   $ 4,512     $ 4,245  
Accrued expenses     3,454       2,994  
Short-term debt     3,057       2,998  
Current portion of long-term debt     211       23  
Current portion of operating lease obligations     62       577  
Current portion of finance lease obligations     12        
Deferred revenue and customer deposits     2,842       3,292  
Total current liabilities     14,150       14,129  
Operating lease obligations, net of current portion     267       3,586  
Finance lease obligations, net of current portion     54        
Long-term debt, net of current portion and deferred debt issuance costs, net     5,107       105  
Deferred income taxes     5,262       5,594  
Other long-term liabilities     1,132       118  
Total liabilities     25,972       23,532  
                 
Stockholders’ equity:                
Preferred stock            
Common stock     221       213  
Additional paid-in capital     53,611       50,807  
Retained earnings     17,191       23,591  
Treasury stock     (18,586 )     (18,586 )
Accumulated other comprehensive loss     (4,312 )     (3,748 )
Total stockholders’ equity     48,125       52,277  
Total liabilities and stockholders’ equity   $ 74,097     $ 75,809  
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                         
    Three Months Ended June 30,     Six Months Ended June 30,  
    2022     2021     2022     2021  
Net product sales   $ 6,683     $ 4,198     $ 14,386     $ 7,726  
Net service revenues     2,460       1,896       4,783       3,140  
Total net revenues     9,143       6,094       19,169       10,866  
Cost of products sold     4,833       2,765       10,690       5,207  
Cost of services     1,890       865       3,547       2,034  
Total cost of revenues     6,723       3,630       14,237       7,241  
Gross profit     2,420       2,464       4,932       3,625  
Selling and administrative expenses:                                
Selling     684       270       1,225       747  
Administrative     2,621       2,178       5,354       4,619  
Total selling and administrative expenses     3,305       2,448       6,579       5,366  
(Loss) income from operations     (885 )     16       (1,647 )     (1,741 )
Other income (expense):                                
Interest income     1       20       7       33  
Interest expense     (88 )     (167 )     (147 )     (257 )
Foreign currency transaction gain (loss)     206       (234 )     (136 )     (218 )
Unrealized loss on equity holdings     (4,178 )           (2,451 )      
Other income (expense), net     3       12       (198 )     154  
Total other expense     (4,056 )     (369 )     (2,925 )     (288 )
Loss from continuing operations before income taxes and equity method holding loss     (4,941 )     (353 )     (4,572 )     (2,029 )
Income tax benefit (expense)     303       (23 )     (47 )     (92 )
Equity method holding loss     (960 )     (376 )     (1,780 )     (1,145 )
         Net loss from continuing operations     (5,598 )     (752 )     (6,399 )     (3,266 )
         Net income from discontinued operations           324             14,649  
         Net (loss) income   $ (5,598 )   $ (428 )   $ (6,399 )   $ 11,383  
                                 
Basic and diluted net (loss) income per share                                
         Continuing operations   $ (0.29 )   $ (0.04 )   $ (0.33 )   $ (0.18 )
         Discontinued operations           0.02             0.83  
Basic and diluted net (loss) income per share   $ (0.29 )   $ (0.02 )   $ (0.33 )   $ 0.65  
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
             
    Six Months Ended June 30,  
    2022     2021  
Cash flows from operating activities:                
Net loss from continuing operations   $ (6,399 )   $ (3,266 )
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:                
Provision for (recovery of) doubtful accounts     3       (134 )
Provision for obsolete inventory     6       50  
Provision for warranty     15       37  
Depreciation and amortization     702       640  
Amortization and accretion of operating leases     137       413  
Equity method holding loss     1,780       1,145  
Adjustment to SageNet promissory note in connection with prepayment     202        
Unrealized loss on equity holdings     2,451        
Deferred income taxes     (292 )     (273 )
Stock-based compensation expense     369       473  
Changes in operating assets and liabilities:                
Accounts receivable     (1,085 )     1,213  
Inventories     (602 )     (568 )
Current income taxes     (135 )     (160 )
Other assets     1,055       (1,564 )
Accounts payable and accrued expenses     (674 )     (1,540 )
Deferred revenue and customer deposits     (446 )     433  
Operating lease obligations     (132 )     (414 )
Net cash used in operating activities from continuing operations     (3,045 )     (3,515 )
Net cash provided by operating activities from discontinued operations           510  
Net cash used in operating activities     (3,045 )     (3,005 )
                 
Cash flows from investing activities:                
Capital expenditures     (840 )     (278 )
Acquisition of programming rights     (337 )      
Purchase of common shares of FG Financial Group, Inc.     (2,000 )      
Receipt of SageNet promissory note     2,300        
Net cash used in investing activities from continuing operations     (877 )     (278 )
Net cash provided by investing activities from discontinued operations           12,761  
Net cash (used in) provided by investing activities     (877 )     12,483  
                 
Cash flows from financing activities:                
Principal payments on short-term debt     (285 )     (295 )
Principal payments on long-term debt     (66 )      
Proceeds from stock issuance, net of costs           6,310  
Payments of withholding taxes related to net share settlement of equity awards     (15 )     (80 )
Proceeds from exercise of stock options           9  
Payments on capital lease obligations     (2 )     (2,105 )
Net cash (used in) provided by financing activities from continuing operations     (368 )     3,839  
Net cash used in financing activities from discontinued operations           (155 )
Net cash (used in) provided by financing activities     (368 )     3,684  
                 
Effect of exchange rate changes on cash and cash equivalents     (30 )     58  
Net (decrease) increase in cash and cash equivalents and restricted cash from continuing operations     (4,320 )     104  
Net increase in cash and cash equivalents and restricted cash from discontinued operations           13,116  
Net (decrease) increase in cash and cash equivalents and restricted cash     (4,320 )     13,220  
Cash and cash equivalents and restricted cash at beginning of period     8,881       4,787  
Cash and cash equivalents and restricted cash at end of period   $ 4,561     $ 18,007  
Ballantyne Strong, Inc. and Subsidiaries
Summary by Business Segments
(In thousands)
(Unaudited)
                         
    Three Months Ended March 31,     Six Months Ended June 30,  
    2022     2021     2022     2021  
                         
Strong Entertainment                                
Revenue   $ 8,822     $ 5,828     $ 18,543     $ 10,301  
Gross profit     2,098       2,386       4,304       3,276  
Operating income     180       1,369       790       1,122  
Adjusted EBITDA     267       497       1,021       415  
                                 
Corporate and Other                                
Revenue   $ 321     $ 266     $ 626     $ 565  
Gross profit     322       78       628       349  
Operating loss     (1,065 )     (1,353 )     (2,437 )     (2,863 )
Adjusted EBITDA     (638 )     (1,238 )     (1,573 )     (2,229 )
                                 
Consolidated                                
Revenue   $ 9,143     $ 6,094     $ 19,169     $ 10,866  
Gross profit   $ 2,420     $ 2,464     $ 4,932     $ 3,625  
Operating loss   $ (885 )   $ 16     $ (1,647 )   $ (1,741 )
Adjusted EBITDA   $ (371 )   $ (741 )   $ (552 )   $ (1,814 )
Ballantyne Strong, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(In thousands)
(Unaudited)
 
    Quarters Ended June 30,  
    2022     2021  
                                                 
      Strong Entertainment       Corporate and Other       Discontinued Operations       Consolidated       Strong Entertainment       Corporate and Other       Discontinued Operations       Consolidated  
Net (loss) income   $ (1,371 )   $ (4,227 )   $     $ (5,598 )   $ 641     $ (1,393 )   $ 324     $ (428 )
Net income from discontinued operations                                         (324 )     (324 )
Net (loss) income from continuing operations     (1,371 )     (4,227 )           (5,598 )     641       (1,393 )           (752 )
Interest expense, net     29       58             87       36       111             147  
Income tax (benefit) expense     (271 )     (32 )           (303 )     17       6             23  
Depreciation and amortization     154       182             336       235       131             366  
EBITDA     (1,459 )     (4,019 )           (5,478 )     929       (1,145 )           (216 )
Stock-based compensation expense           175             175             159             159  
Equity method holding loss (income)           960             960       383       (7 )           376  
Unrealized loss on equiity holdings     1,932       2,246             4,178                          
Foreign currency transaction (income) loss     (206 )                 (206 )     234                   234  
Employee retention credit                             (1,049 )     (245 )           (1,294 )
Adjusted EBITDA   $ 267     $ (638 )   $     $ (371 )   $ 497     $ (1,238 )   $     $ (741 )
    Six Months Ended June 30,  
    2022     2021  
                                                 
      Strong Entertainment       Corporate and Other       Discontinued Operations       Consolidated       Strong Entertainment       Corporate and Other       Discontinued Operations       Consolidated  
Net (loss) income   $ (637 )   $ (5,762 )   $     $ (6,399 )   $ 33     $ (3,299 )   $ 14,649     $ 11,383  
Net income from discontinued operations                                         (14,649 )     (14,649 )
Net (loss) income from continuing operations     (637 )     (5,762 )           (6,399 )     33       (3,299 )           (3,266 )
Interest expense, net     53       87             140       60       164             224  
Income tax expense     40       7             47       79       13             92  
Depreciation and amortization     367       335             702       471       169             640  
EBITDA     (177 )     (5,333 )           (5,510 )     643       (2,953 )           (2,310 )
Stock-based compensation expense           369             369             473             473  
Equity method holding loss           1,780             1,780       736       409             1,145  
Employee retention credit                             (1,049 )     (245 )           (1,294 )
Unrealized loss on equiity holdings     1,064       1,387             2,451                          
Foreign currency transaction loss     134       2             136       218                   218  
Gain on property and casualty insurance recoveries                             (148 )                 (148 )
Severance and other           222             222       15       87             102  
Adjusted EBITDA   $ 1,021     $ (1,573 )   $     $ (552 )   $ 415     $ (2,229 )   $     $ (1,814 )

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