BTN - Ballantyne Strong Reports Fourth Quarter and Full Year 2019 Operating Results

March, 12 2020 08:00 AM Ballantyne Strong Inc.

Charlotte, NC, March 12, 2020 (GLOBE NEWSWIRE) -- Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company”) today announced financial results for the fourth quarter and year ended December 31, 2019. The Company conducts its operations through three operating segments: Strong Entertainment, Convergent and Strong Outdoor.

Financial and Operational Highlights

Significant improvements in consolidated gross profit, income from operations, Adjusted EBITDA and cash flow from operations.

Convergent’s Digital Signage as a Service (DSaaS) recurring revenue model continues to expand, driving increased gross margin and operating performance.

Strong Entertainment’s operating results improved significantly in the second half of 2019 as compared with the first half as facility construction in Quebec was completed and customer orders increased.

Strong Outdoor turned profitable in the fourth quarter. The transaction with Firefly Systems, Inc. (“Firefly”) and related $4.8 million investment provide additional long-term upside potential.

Kyle Cerminara, Chairman and CEO, commented, “During 2019, we were focused on driving improved operating performance from each of our business units. We repositioned Convergent’s operating model to focus on expanding our Digital Signage as a Service platform, we restructured Strong Outdoor’s cost model and expanded our sales team resulting in its first profitable quarter, and we completed the plant expansion in Quebec following the weather-related damage in early 2019. We also completed a transaction with Firefly wherein we received a preferred equity stake, which we believe offers significant upside potential. Firefly continues to rapidly expand its digital advertising business and we are excited to participate in its anticipated success going forward.”

Fourth Quarter and Full Year 2019 Financial Review

Consolidated operating results improved from prior year periods. Convergent continued to generate improved gross margins and overall profitability following our repositioning of the business to a higher margin recurring revenue business model. Strong Outdoor’s operating results improved with higher ad revenues and the positive impact of the transaction with Firefly. Strong Entertainment strengthened sequentially from the first half of 2019 as business activity returned to normal following weather-related production disruptions at our Quebec manufacturing facility.

Total revenue decreased 6.0% to $17.1 million for the fourth quarter of 2019 and decreased 3.3% to $62.6 million for the full year 2019. Services revenue grew 9.3% during full year 2019 with the transition to a higher mix of recurring services revenue. Product sales revenue decreased 14.4% during full year 2019, primarily due to lower screen system sales associated with the temporary production disruptions at our Quebec manufacturing plant in the first half of 2019 and lower international volume. In addition, the prior year periods included revenue from one-time audio and product sale and installations that did not recur in 2019.

Gross profit increased 50.4% to $6.8 million for the fourth quarter of 2019 and increased 51.7% to $18.5 million for the full year 2019. Gross profit margins improved to 39.6% for the fourth quarter of 2019 from 24.7% in for the fourth quarter of 2018 and improved to 29.5% for the full year 2019 from 18.8% during the full year 2018. The improvement was a direct result of repositioning Convergent to a high margin recurring revenue model combined with cost reduction initiatives and improvements in Strong Outdoor’s operating cost structure.

Operating income improved to $0.8 million for the fourth quarter of 2019 from $0.1 million in the prior year and improved to an operating loss of $4.0 million for the full year 2019 from a loss of $10.3 million in the prior year. Improved operating performance at Convergent and Strong Outdoor were partially offset by the lower revenue and related contribution from Strong Entertainment.

Net loss was $0.7 million ($0.05 per share) for the fourth quarter of 2019 as compared to $0.6 million ($0.04 per share) in the prior year. Net loss was $10.1 million ($0.70 per share) for the full year 2019 compared to $12.3 million ($0.86 per share) in the prior year. Improved operating results were partially offset by higher non-cash fair value adjustments and increased equity method investment losses in the current year.

Adjusted EBITDA, a non-GAAP measure, improved to $2.6 million for the fourth quarter of 2019 compared to $1.1 million in the prior year. On a full year basis, Adjusted EBITDA improved by $5.4 million to positive $1.4 million for full year 2019 compared to a loss of $4.0 million in the prior year.

Conference Call

A conference call to discuss the fourth quarter and full year 2019 financial results will be held on Thursday, March 12, 2020 at 8:30 am Eastern Time. Investors and analysts are invited to access the conference call by dialing 877-407-3982 (domestic) or 201-493-6780 (international) and providing the operator with conference ID number: 13699717. Please dial in at least five minutes before the start of the call to register. A replay will be available approximately two hours after the conclusion of the conference call until Sunday, April 12, 2020 by dialing 844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and entering the conference ID number: 13699717.

The Company’s financial results and an accompanying slide presentation will also be available on the Investor Relations page of the Company’s website at ballantynestrong.com/investors.

Use of Non-GAAP Measures

Ballantyne Strong, Inc. 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, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude income taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes share-based compensation, impairment charges, equity method income (loss), fair value adjustments, severance, foreign currency transaction gains (losses), transactional expenses 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 loss or to net cash used in operating activities as measures of operating results or liquidity. Our 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. A reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA is included in the accompanying financial schedules.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our 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 our 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 our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We believe 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). We also present EBITDA and Adjusted EBITDA because (i) we believe these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors.

For further information, please refer to Ballantyne Strong, Inc.’s Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 12, 2020, available online at www.sec.gov.

About Ballantyne Strong, Inc.

Ballantyne Strong (www.ballantynestrong.com) and its subsidiaries engage in diverse business activities including the design, integration and installation of technology solutions for a broad range of applications; development and delivery of out-of-home messaging, advertising and communications; manufacturing of projection screens; and providing managed services including monitoring of networked equipment. The Company focuses on serving the cinema, retail, financial, advertising and government markets.

Forward-Looking Statements

Except for the historical information in this press release, it includes forward-looking statements 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 our Annual Report on Form 10-K for the year ended December 31, 2018, the Company’s subsequent filings with the SEC, and the following risks and uncertainties: the Company’s ability to expand its revenue streams, 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, the Company’s ability to maintain its brand and reputation and retain or replace its significant customers, the impact of a challenging global economic environment or a downturn in the markets, 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 Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events (such as the ongoing Coronavirus outbreak emanating from China), the adequacy of insurance and the impact of having a controlling stockholder. 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. 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 our 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 forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Ballantyne Strong, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)



December 31, 2019


December 31, 2018








Assets








Current assets:








Cash and cash equivalents

$
4,951


$
6,698

Restricted cash


351



350

Accounts receivable (net of allowance for doubtful accounts of $1,291 and $1,832, respectively)


12,898



13,841

Inventories, net


2,879



3,490

Recoverable income taxes


190



281

Other current assets


1,754



1,663

Total current assets


23,023



26,323

Property, plant and equipment (net of accumulated depreciation of $10,238 and $9,028, respectively)


10,560



14,483

Operating lease right-of-use assets


5,581



-

Finance lease right-of-use assets


2,563



692

Investments


13,311



11,167

Intangible assets, net


1,534



1,795

Goodwill


919



875

Notes receivable


-



3,965

Other assets


142



337

Total assets

$
57,633


$
59,637

Liabilities and Stockholders’ Equity








Current liabilities:








Accounts payable

$
3,273


$
4,724

Accrued expenses


4,416



2,782

Short-term debt


3,080



3,152

Current portion of long-term debt


998



1,094

Current portion of operating lease obligations


971



-

Current portion of finance lease obligations


1,586



160

Deferred revenue and customer deposits


2,981



2,310

Total current liabilities


17,305



14,222

Long-term debt, net of current portion and debt issuance costs


3,019



10,053

Operating lease obligations, net of current portion


4,809



-

Finance lease obligations, net of current portion


3,988



427

Deferred revenue and customer deposits, net of current portion


38



1,167

Deferred income taxes


2,649



2,516

Other long-term liabilities


116



254

Total liabilities


31,924



28,639

Commitments and contingencies








Stockholders’ equity:








Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding


-



-

Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,410 and 17,237 shares at December 31, 2019 and December 31, 2018, respectively; outstanding 14,616 and 14,443 shares at December 31, 2019 and December 31, 2018, respectively


174



172

Additional paid-in capital


42,589



41,471

Retained earnings


6,001



13,319

Less 2,794 of common shares in treasury, at cost


(18,586
)


(18,586
)
Accumulated other comprehensive loss


(4,469
)


(5,378
)
Total stockholders’ equity


25,709



30,998

Total liabilities and stockholders’ equity

$
57,633


$
59,637

Ballantyne Strong, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)



Three Months Ended December 31,


Years Ended December 31,



2019


2018


2019


2018

Net revenues

$
17,129


$
18,232


$
62,550


$
64,689

Cost of revenues


10,348



13,722



44,077



52,510

Gross profit


6,781



4,510



18,473



12,179

Selling and administrative expenses:
















Selling


1,457



1,168



5,281



4,806

Administrative


4,488



3,285



17,085



15,587

Total selling and administrative expenses


5,945



4,453



22,366



20,393

Loss on disposal of assets


(2
)


(6
)


(107
)


(2,135
)
Income (loss) from operations


834



51



(4,000
)


(10,349
)
Other income (expense):
















Interest income


-



-



3



-

Interest expense


(255
)


(180
)


(823
)


(447
)
Fair value adjustment to notes receivable


(705
)


197



(2,857
)


1,150

Foreign currency transaction (loss) gain


(111
)


292



(265
)


333

Other income (expense), net


1,264



(28
)


2,132



(35
)
Total other income (expense)


193



281



(1,810
)


1,001

Income (loss) before income taxes and equity method investment loss


1,027



332



(5,810
)


(9,348
)
Income tax expense


987



591



2,282



2,427

Equity method investment loss


(788
)


(309
)


(2,011
)


(552
)
Net loss

$
(748
)

$
(568
)

$
(10,103
)

$
(12,327
)
Basic loss per share

$
(0.05
)

$
(0.04
)

$
(0.70
)

$
(0.86
)
Diluted loss per share

$
(0.05
)

$
(0.04
)

$
(0.70
)

$
(0.86
)

Ballantyne Strong, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)



Years Ended December 31,



2019


2018

Cash flows from operating activities:








Net loss

$
(10,103
)

$
(12,327
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:








(Recovery of) provision for doubtful accounts


(621
)


188

(Benefit) provision for obsolete inventory


(75
)


170

(Benefit) provision for warranty


(73
)


208

Depreciation and amortization


3,534



2,712

Amortization and accretion of operating leases


1,731



-

Fair value adjustment to notes receivable


2,857



(1,150
)
Equity method investment loss


2,011



552

Recognition of contract acquisition costs


-



29

Loss on disposal of assets


107



2,135

Gain on Firefly transaction


(431
)


-

Deferred income taxes


(52
)


(250
)
Impairment of operating lease


-



209

Impairment of contract acquisition costs


-



59

Stock-based compensation expense


1,120



837

Dividends received from investee


-



813

Changes in operating assets and liabilities:








Accounts receivable


1,753



(3,540
)
Inventories


770



1,020

Current income taxes


100



192

Other assets


244



(772
)
Accounts payable and accrued expenses


587



1,008

Deferred revenue and customer deposits


634



682

Operating lease obligations


(1,894
)


-

Net cash provided by (used in) operating activities


2,199



(7,225
)









Cash flows from investing activities:








Proceeds from sale of equity securities


-



4,531

Proceeds from sale of property, plant and equipment


121



-

Dividends received from investee in excess of cumulative earnings


-



69

Capital expenditures


(2,467
)


(1,984
)
Net cash (used in) provided by investing activities


(2,346
)


2,616










Cash flows from financing activities:








Proceeds from issuance of long-term debt


237



-

Proceeds from issuance of short-term debt


-



3,963

Proceeds from sale-leaseback financing


-



7,000

Principal payments on short-term debt


(427
)


(1,154
)
Principal payments on long-term debt


(963
)


(2,476
)
Payment of debt issuance costs


-



(22
)
Payments on capital lease obligations


(712
)


(230
)
Other


-



(8
)
Net cash (used in) provided by financing activities


(1,865
)


7,073

Effect of exchange rate changes on cash and cash equivalents


266



(286
)
Net (decrease) increase in cash and cash equivalents and restricted cash


(1,746
)


2,178

Cash and cash equivalents and restricted cash at beginning of year


7,048



4,870

Cash and cash equivalents and restricted cash at end of year

$
5,302


$
7,048










Components of cash and cash equivalents and restricted cash:








Cash and cash equivalents

$
4,951


$
6,698

Restricted cash


351



350

Total cash and cash equivalents and restricted cash

$
5,302


$
7,048

Ballantyne Strong, Inc. and Subsidiaries
Summary by Business Segments
(In thousands)
(Unaudited)



Quarters Ended December 31,


Years Ended December 31,



2019


2018


2019


2018














Strong Entertainment
















Revenue

$
10,469


$
10,782


$
36,874


$
43,875

Gross profit


3,537



3,695



12,159



14,710

Operating income


2,026



2,726



6,671



10,407

Adjusted EBITDA


2,655



2,965



8,021



11,329


















Convergent
















Revenue

$
4,824


$
5,706


$
20,028


$
16,932

Gross profit


2,055



1,481



6,677



2,061

Operating income (loss)


601



687



2,068



(4,483
)
Adjusted EBITDA


1,228



1,078



4,087



(1,309
)

















Strong Outdoor
















Revenue

$
1,722


$
1,684


$
5,247


$
3,632

Gross profit (loss)


1,075



(726
)


(764
)


(4,843
)
Operating income (loss)


368



(1,118
)


(3,461
)


(6,070
)
Adjusted EBITDA


481



(1,041
)


(2,851
)


(5,803
)

















Corporate and Other
















Revenue

$
114


$
60


$
401


$
250

Gross profit


114



60



401



251

Operating loss


(2,161
)


(2,244
)


(9,278
)


(10,203
)
Adjusted EBITDA


(1,718
)


(1,944
)


(7,856
)


(8,227
)

















Consolidated
















Revenue

$
17,129


$
18,232


$
62,550


$
64,689

Gross profit


6,781



4,510



18,473



12,179

Operating income (loss)


834



51



(4,000
)


(10,349
)
Adjusted EBITDA


2,646



1,058



1,401



(4,010
)

Ballantyne Strong, Inc. and Subsidiaries
Reconciliation of Net Loss to Adjusted EBITDA
(In thousands)
(Unaudited)



Quarters Ended December 31,



2019


2018



Strong Entertainment


Convergent


Strong Outdoor


Corporate and Other


Consolidated


Strong Entertainment


Convergent


Strong Outdoor


Corporate and Other


Consolidated

Net income (loss)

$
959



397


$
512



(2,616
)

$
(748
)

$
2,499



416


$
(1,118
)


(2,365
)

$
(568
)
Interest expense, net


34



154



67



-



255



28



60



-



92



180

Income tax expense


1,011



61



-



(85
)


987



410



181



-



-



591

Depreciation and amortization


232



604



111



51



998



231



413



77



98



819

EBITDA


2,236



1,216



690



(2,650
)


1,492



3,168



1,070



(1,041
)


(2,175
)


1,022

Stock-based compensation expense


-



-



-



322



322



-



-



-



189



189

Fair value adjustment to notes receivable


705



-



-



-



705



(197
)


-



-



-



(197
)
Equity method investment loss


178



-



-



610



788



267



-



-



42



309

Loss on disposal of assets and impairment charges


2



-



-



-



2



4



2



-



-



6

Foreign currency transaction loss (gain)


122



(11
)


-



-



111



(277
)


(15
)


-



-



(292
)
Gain on Firefly transaction, net of transaction costs


-



-



(209
)


-



(209
)


-



-



-



-



-

Gain on property and casualty insurance recoveries


(588
)


-



-



-



(588
)


-



-



-



-



-

Severance and other


-



23



-



-



23



-



21



-



-



21

Adjusted EBITDA

$
2,655


$
1,228


$
481


$
(1,718
)

$
2,646


$
2,965


$
1,078


$
(1,041
)

$
(1,944
)

$
1,058



Years Ended December 31,



2019


2018



Strong Entertainment


Convergent


Strong Outdoor


Corporate and Other


Consolidated


Strong Entertainment


Convergent


Strong Outdoor


Corporate and Other


Consolidated

Net income (loss)

$
2,079



1,483


$
(3,264
)


(10,401
)

$
(10,103
)

$
8,834



(5,448
)

$
(6,070
)


(9,643
)

$
(12,327
)
Interest expense, net


140



475



233



(28
)


820



72



239



-



136



447

Income tax expense


2,148



134



-



-



2,282



1,925



502



-



-



2,427

Depreciation and amortization


896



1,991



434



213



3,534



892



1,312



267



273



2,744

EBITDA


5,263



4,083



(2,597
)


(10,216
)


(3,467
)


11,723



(3,395
)


(5,803
)


(9,234
)


(6,709
)
Stock-based compensation expense


-



-



-



1,120



1,120



-



-



-



837



837

Fair value adjustment to notes receivable


2,857



-



-



-



2,857



(1,150
)


-



-



-



(1,150
)
Equity method investment loss (income)


779



-



-



1,232



2,011



1,233



-



-



(681
)


552

Loss on disposal of assets and impairment charges


68



1



38



-



107



6



1,707



-



818



2,531

Foreign currency transaction loss (gain)


289



(24
)


-



-



265



(483
)


150



-



-



(333
)
Gain on Firefly transaction, net of transaction costs


-



-



(319
)


-



(319
)


-



-



-



-



-

Gain on property and casualty insurance recoveries


(1,235
)


-



-



-



(1,235
)


-



-



-



-



-

Severance and other


-



27



27



8



62



-



229



-



33



262

Adjusted EBITDA

$
8,021


$
4,087


$
(2,851
)

$
(7,856
)

$
1,401


$
11,329


$
(1,309
)

$
(5,803
)

$
(8,227
)

$
(4,010
)

For Investor Relations Inquiries:
Ballantyne Strong, Inc.
Mark Roberson
Chief Financial Officer
IR@btn-inc.com
704-994-8279

Company Name:	Ballantyne Strong Inc.
Stock Symbol:	BTN
Market:	NYSE
Website:	ballantynestrong.com

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