BTN - Ballantyne Strong Reports Second Quarter and Year to Date 2019 Operating Results

August, 14 2019 04:15 PM Ballantyne Strong Inc.

Charlotte, NC, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company”), a holding company with diverse business activities focused on serving the cinema, retail, financial, advertising and government markets, today announced financial results for the period ended June 30, 2019. The Company conducts its operations through three operating segments: Strong Cinema, Convergent and Strong Outdoor.

Second Quarter and First Half 2019 Highlights

Total revenue increased 0.6% to $14.3 million for the second quarter of 2019 compared to the prior year and decreased 4.8% to $28.6 million for the first half of 2019 compared to the prior year. Revenue grew 53.1% for the quarter and 37.7% for the first half in our Convergent business unit primarily due to the acceleration of our DSaaS recurring revenue business model. Strong Cinema posted lower revenue for the quarter and first half, as weather-related damage at our production facility impacted operations. The newly improved and expanded production area is nearing completion and expected to be operational soon.

Gross profit increased 150.3% to $3.2 million for the second quarter of 2019 and increased 42.0% to $5.9 million for the first half of 2019. Gross profit margins improved to 22.7% for the quarter from 9.1% and improved to 20.6% from 13.8% for the first half. The improvement was a direct result of repositioning Convergent to a high margin recurring revenue model combined with cost reduction initiatives. Gross profit margins remained stable at Strong Cinema, while the gross profit dollar contribution declined as a result of the lower revenue in the current periods.

Operating loss improved 57.9% to $2.3 million for the second quarter of 2019 and improved 43.1% to $4.9 million for the first half of 2019. Improved operating performance at Convergent and Strong Outdoor combined with reductions in administrative expenses were partially offset by the lower contribution from Strong Cinema in the current periods.

Net loss improved 49.4% to $3.4 million ($0.24 per share) for the second quarter of 2019 as compared to $6.8 million ($0.47 per share) in the prior year. Net loss improved 28.2% to $7.6 million ($0.52 per share) for the first half of 2019 as compared to $10.5 million ($0.73 per share) in the prior year. Net loss improved primarily due to improved operating results partially offset by non-cash fair value adjustments and equity method investment losses.

Adjusted EBITDA, a non-GAAP measure, improved to negative $0.9 million for the first quarter of 2019 from negative $3.2 million in the prior year. On a year to date basis, Adjusted EBITDA improved to negative $2.5 million from negative $5.4 million, due primarily to operating improvements at Convergent and reduced administrative expenses.

Announced transaction with Firefly Systems Inc. (“Firefly”), receiving $4.8 million Series A-2 preferred shares in conjunction with entering into agreements with Firefly to collaborate on its digital advertising business. If the transaction had been effective for the full six-month period, reported revenue would have been reduced by approximately $0.9 million, operating expenses would have been reduced by approximately $2.4 million, and operating income would have been increased by approximately $1.5 million.

Kyle Cerminara, Chairman and CEO, commented, “Overall, Ballantyne Strong generated significantly improved operating results with consolidated operating profit metrics all improving from the prior year. Convergent continued to post gains in operating results reflecting the growth in our recurring revenue DSaaS business combined with a significant reduction in operating costs. We believe that Strong Outdoor is much better positioned following the recently announced investment and collaboration agreement with Firefly. At Strong Cinema, construction is coming along nicely on our newly upgraded production facility and we expect to see a positive impact and sequential improvements in the second half.”

Conference Call

A conference call to discuss the second quarter 2019 financial results will be held on Wednesday, August 14, 2019 at 4:30 pm 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: 13693626. A replay will be available approximately two hours after the conclusion of the conference call until Saturday, September 14, 2019 by dialing 844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and entering the conference ID number: 13693626.

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 taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes share-based compensation, impairment charges, equity method income/loss, fair value adjustments, severance and transactional expenses and other non-cash charges.

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 Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or about August 14, 2019, 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 of 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 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, 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.

CONTACT

Ballantyne Strong, Inc.
Mark Roberson
Chief Financial Officer
IR@btn-inc.com
704-994-8295

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



June 30, 2019


December 31, 2018



(unaudited)




Assets








Current assets:








Cash and cash equivalents

$
2,869


$
6,698

Restricted cash


350



350

Accounts receivable (net of allowance for doubtful accounts of $1,549 and $1,832, respectively)


13,638



13,841

Inventories, net


3,459



3,490

Recoverable income taxes


435



281

Other current assets


1,669



1,663

Total current assets


22,420



26,323

Property, plant and equipment (net of accumulated depreciation of $9,290 and $9,046, respectively)


11,755



14,483

Operating lease right-of-use assets


5,831



-

Finance lease right-of-use assets


1,236



692

Investments


14,381



11,167

Intangible assets, net


1,685



1,795

Goodwill


899



875

Notes receivable


2,658



3,965

Other assets


247



337

Total assets

$
61,112


$
59,637

Liabilities and Stockholders’ Equity








Current liabilities:








Accounts payable

$
5,089


$
4,724

Accrued expenses


2,986



2,782

Short-term debt


3,237



3,152

Current portion of long-term debt


970



1,094

Current portion of operating lease obligations


982



-

Current portion of finance lease obligations


1,052



160

Deferred revenue and customer deposits


3,885



2,310

Total current liabilities


18,201



14,222

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


3,518



10,053

Operating lease obligations, net of current portion


5,111



-

Finance lease obligations, net of current portion


3,437



427

Deferred revenue and customer deposits, net of current portion


1,160



1,167

Deferred income taxes


2,329



2,516

Other accrued expenses, net of current portion


84



254

Total liabilities


33,840



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 17,313 and 17,237 shares at June 30, 2019 and December 31, 2018, respectively; outstanding 14,519 and 14,443 shares at June 30, 2019 and December 31, 2018, respectively


169



169

Additional paid-in capital


41,938



41,474

Accumulated other comprehensive loss


(4,785
)


(5,378
)
Retained earnings


8,536



13,319

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


(18,586
)


(18,586
)
Total stockholders’ equity


27,272



30,998

Total liabilities and stockholders’ equity

$
61,112


$
59,637

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,



2019


2018


2019


2018

Net product sales

$
6,082


$
7,450


$
11,648


$
16,184

Net service revenues


8,187



6,728



16,927



13,821

Total net revenues


14,269



14,178



28,575



30,005

Cost of products sold


3,747



5,492



9,781



11,469

Cost of services


7,288



7,394



12,915



14,395

Total cost of revenues


11,035



12,886



22,696



25,864

Gross profit


3,234



1,292



5,879



4,141

Selling and administrative expenses:
















Selling


1,222



1,274



2,450



2,500

Administrative


4,297



4,208



8,226



8,917

Total selling and administrative expenses


5,519



5,482



10,676



11,417

Loss on disposal of assets


(38
)


(1,331
)


(102
)


(1,331
)
Loss from operations


(2,323
)


(5,521
)


(4,899
)


(8,607
)
Other income (expense):
















Interest expense


(186
)


(42
)


(305
)


(87
)
Fair value adjustment to notes receivable


(797
)


192



(1,307
)


150

Foreign currency transaction (loss) gain


(77
)


3



(220
)


107

Other income (expense), net


418



(5
)


453



(11
)
Total other (expense) income


(642
)


148



(1,379
)


159

Loss before income taxes and equity method investment loss


(2,965
)


(5,373
)


(6,278
)


(8,448
)
Income tax expense


423



642



564



1,339

Equity method investment loss


(30
)


(740
)


(727
)


(751
)
Net loss

$
(3,418
)

$
(6,755
)

$
(7,569
)

$
(10,538
)
Basic loss per share

$
(0.24
)

$
(0.47
)

$
(0.52
)

$
(0.73
)
Diluted loss per share

$
(0.24
)

$
(0.47
)

$
(0.52
)

$
(0.73
)

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



Six Months Ended June 30,



2019


2018

Cash flows from operating activities:








Net loss

$
(7,569
)

$
(10,538
)
Adjustments to reconcile net loss to net cash used in operating activities:








(Recovery of) provision for doubtful accounts


(404
)


143

Provision for obsolete inventory


96



535

Provision for warranty


25



58

Depreciation and amortization


1,644



1,140

Amortization and accretion of operating leases


1,132



-

Fair value adjustment to notes receivable


1,307



(150
)
Equity method investment loss


727



751

Recognition of contract acquisition costs


-



29

Loss on disposal of assets


102



1,331

Gain on Firefly transaction


(220
)


-

Deferred income taxes


(198
)


18

Impairment of operating lease


-



74

Stock-based compensation expense


464



482

Changes in operating assets and liabilities:








Accounts receivable


2,691



(297
)
Inventories


(19
)


557

Current income taxes


(144
)


22

Other assets


120



(591
)
Accounts payable and accrued expenses


(316
)


1,115

Deferred revenue and customer deposits


(438
)


1,156

Operating lease obligations


(1,234
)


-

Net cash used in operating activities


(2,234
)


(4,165
)









Cash flows from investing activities:








Proceeds from sale of property, plant and equipment


86



-

Dividends received from investee in excess of cumulative earnings


-



46

Capital expenditures


(1,136
)


(887
)
Net cash used in investing activities


(1,050
)


(841
)









Cash flows from financing activities:








Proceeds from issuance of long-term debt


237



3,234

Proceeds from sale-leaseback financing


-



7,000

Principal payments on short-term debt


(200
)


(1,039
)
Principal payments on long-term debt


(491
)


(1,974
)
Payment of debt issuance costs


-



(17
)
Payments on capital lease obligations


(137
)


(96
)
Other


-



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


(591
)


7,100

Effect of exchange rate changes on cash and cash equivalents


46



(117
)
Net (decrease) increase in cash and cash equivalents and restricted cash


(3,829
)


1,977

Cash and cash equivalents and restricted cash at beginning of period


7,048



4,870

Cash and cash equivalents and restricted cash at end of period

$
3,219


$
6,847

Components of cash and cash equivalents and restricted cash:








Cash and cash equivalents

$
2,869


$
6,847

Restricted cash


350



-

Total cash and cash equivalents and restricted cash

$
3,219


$
6,847

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



Quarters Ended June 30,


Six Months Ended June 30,



2019


2018


2019


2018

Strong Cinema
















Revenue

$
7,879


$
10,353


$
15,479


$
21,664

Gross profit


2,537



3,215



4,953



6,600

Operating income


1,256



1,973



2,415



4,298

Adjusted EBITDA


1,589



2,248



2,935



4,940


















Convergent
















Revenue

$
5,135


$
3,355


$
10,670


$
7,746

Gross profit


1,584



(34
)


3,153



632

Operating income (loss)


321



(2,731
)


1,073



(3,756
)
Adjusted EBITDA


804



(1,103
)


1,967



(1,954
)

















Strong Outdoor
















Revenue

$
1,135


$
406


$
2,229


$
468

Gross loss


(1,007
)


(1,953
)


(2,424
)


(3,218
)
Operating loss


(1,593
)


(2,278
)


(3,605
)


(3,776
)
Adjusted EBITDA


(1,234
)


(2,211
)


(3,147
)


(3,664
)

















Corporate and Other
















Revenue

$
120


$
64


$
197


$
127

Gross profit


120



64



197



127

Operating loss


(2,307
)


(2,485
)


(4,782
)


(5,373
)
Adjusted EBITDA


(2,035
)


(2,176
)


(4,211
)


(4,746
)

















Consolidated
















Revenue

$
14,269


$
14,178


$
28,575


$
30,005

Gross profit


3,234



1,292



5,879



4,141

Operating loss


(2,323
)


(5,521
)


(4,899
)


(8,607
)
Adjusted EBITDA


(876
)


(3,242
)


(2,456
)


(5,424
)

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



Quarters Ended June 30,



2019


2018



Strong Cinema


Convergent


Strong Outdoor


Corporate and Other


Consolidated


Strong Cinema


Convergent


Strong Outdoor


Corporate and Other


Consolidated

Net income (loss)

$
202



120


$
(1,410
)


(2,330
)

$
(3,418
)

$
735



(3,014
)

$
(2,279
)


(2,197
)

$
(6,755
)
Interest expense, net


35



111



38



2



186



2



18



-



22



42

Income tax expense


288



101



-



34



423



440



202



-



-



642

Depreciation and amortization


220



472



100



55



847



219



261



68



60



608

EBITDA


745



804



(1,272
)


(2,239
)


(1,962
)


1,396



(2,533
)


(2,211
)


(2,115
)


(5,463
)
Stock-based compensation expense


-



-



-



221



221



-



-



-



227



227

Fair value adjustment to notes receivable


797



-



-



-



797



(192
)


-



-



-



(192
)
Equity method investment loss (income)


47



-



-



(17
)


30



1,042



-



-



(302
)


740

Loss on disposal of assets


-



-



38



-



38



2



1,329



-



-



1,331

Severance and other


-



-



-



-



-



-



101



-



14



115

Adjusted EBITDA

$
1,589


$
804


$
(1,234
)

$
(2,035
)

$
(876
)

$
2,248


$
(1,103
)

$
(2,211
)

$
(2,176
)

$
(3,242
)



Six Months Ended June 30,



2019


2018



Strong Cinema


Convergent


Strong Outdoor


Corporate and Other


Consolidated


Strong Cinema


Convergent


Strong Outdoor


Corporate and Other


Consolidated

Net income (loss)

$
(145
)


699


$
(3,444
)


(4,679
)

$
(7,569
)

$
2,598



(4,138
)

$
(3,776
)


(5,222
)

$
(10,538
)
Interest expense, net


72



202



59



(28
)


305



15



27



-



45



87

Income tax expense


310



169



-



85



564



1,092



247



-



-



1,339

Depreciation and amortization


440



896



200



108



1,644



443



480



112



105



1,140

EBITDA


677



1,966



(3,185
)


(4,514
)


(5,056
)


4,148



(3,384
)


(3,664
)


(5,072
)


(7,972
)
Stock-based compensation expense


-



-



-



464



464



-



-



-



482



482

Fair value adjustment to notes receivable


1,307



-



-



-



1,307



(150
)


-



-



-



(150
)
Equity method investment loss (income)


888



-



-



(161
)


727



940



-



-



(189
)


751

Loss on disposal of assets


63



1



38



-



102



2



1,329



-



-



1,331

Severance and other


-



-



-



-



-



-



101



-



33



134

Adjusted EBITDA

$
2,935


$
1,967


$
(3,147
)

$
(4,211
)

$
(2,456
)

$
4,940


$
(1,954
)

$
(3,664
)

$
(4,746
)

$
(5,424
)

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

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