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Ballantyne Strong Reports Fourth Quarter and Full Year 2019 Operating Results

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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