Ballantyne Strong, Inc (BTN)

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Ballantyne Strong, Inc (BTN)

Q4 2013 Results Earnings Conference Call

March 14, 2014 12:00 PM ET


Tricia Ross - Financial Profiles, IR

Gary Cavey - President and CEO

Mary Carstens - Chief Financial Officer


Tristan Thomas - Sidoti & Company



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Ballantyne Strong Fourth Quarter and Fiscal Year End 2013 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions)

This conference is being recorded today March 14, 2014. I would now like to turn the conference over to Ms. Tricia Ross of Financial Profiles. Please go ahead.

Tricia Ross

Good morning, everyone. And welcome today’s fourth quarter 2013 earnings call. Today’s call and webcast may contain forward-looking statements related to the company's future operating results.

Except for the historical information, it may include forward-looking statements that involve risks and uncertainties, including but not limited to quarterly fluctuations and results, customer demand for the company’s products, the development of new technology for alternate means of motion picture presentation, domestic and international economic conditions, the management of growth and other risks detailed from time-to-time in the company’s Securities and Exchange Commission filings. Actual results may differ materially from management’s expectations.

In addition, the company’s comments on today's call may contain certain non-GAAP financial measures, including non-GAAP earnings and non-GAAP earnings per share. For additional information, including reconciliations from GAAP results to non-GAAP measures are the non-GAAP measures provide useful information and why the company uses non-GAAP measures, please see the reconciliation section of the fourth quarter 2013 please release which appears on the company’s corporate website.

Joining us today from management are President and CEO, Gary Cavey; and CFO, Mary Carstens.

At this time, I would now like to turn the call over to Gary. Gary?

Gary Cavey

Thank you, Tricia. Good morning, everybody. Thanks for joining us. Earlier today we reported our results for the fourth quarter of 2013. From a revenue perspective, we had a strong finish to the year, which was driven by several large orders for digital projectors in our international markets.

We shipped a total of 350 digital projection systems worldwide in the fourth quarter versus 170 units in the 2013 third quarter. A significant portion of our fourth quarter sales were in the Latin America and Asian markets, where there is still good demand, although for lower margin projectors.

With the digital conversion cycle largely complete, we expect that our future product sales in the projector business will be primarily driven by the ongoing parts, refresh of existing theaters and newbuilds, as well as the future technology upgrades.

One of the technology upgrades that will be rolled out this year is a new laser driven projector from NEC. The laser driven projector has a number of advantages over the lamp driven projectors that tend to experience a slow deterioration in picture quality as the lamp ages.

We anticipate that there will be a strong interest in this new technology that should drive sales opportunities in the future. While there will still be a solid level of demand for digital projection systems, we are expecting our sales to be fairly lumpy in this business on a quarter-to-quarter basis.

Now that the conversion to digital is fundamentally complete, we can't rely upon the past historical sales trends to project the level of demand we will see in the future. Digital equipment sales are largely depended upon when the exhibitors decide to invest additional capital into their businesses, which tend to elongate the sales cycle and increase the volatility in the quarter-to-quarter trends. The increased lumpiness we are now seeing in the digital equipment sales underscores the importance of our ship towards our managed services business that creates a more consistent reoccurring revenue stream.

Moving to our recent acquisition of Convergent Media Systems, we are making good progress with the integration. We have spent the last few months meeting key customers and suppliers and based on the feedback we have gathered, it's clear that the digital media business is still in the very early innings in the terms of its rollout and we are currently at a very important transition point.

With in-store digital displays already being widely adopted within multiple industries, the next phase of the development of the digital media business will be more focused on integrating with mobile devices to create a deeper engagement with the customers. Businesses are seeking on omni-solutions that deliver dynamic content to the digital displays located throughout the retail locations, as well as delivering highly targeted messaging directly to the mobile devices of its in-store consumers.

This highly targeted messaging can educate consumers about new products, inform them about special promotions, create more awareness of other services that might be appealing among many other uses. It’s an exciting new opportunity for the digital media industry to create more holistic marketing campaigns that can be more accurately measured in terms of their return on investment and ultimately drive more marketing dollars for this category.

With Convergent’s comprehensive technical and creative capabilities and the ability to be an end-to-end single source solution for digital media campaigns, we are well positioned to capitalize on the evolution of the digital media industry. We will need to continue to make investments in this business to ensure that we remain at the forefront of the industry and we are exploring a number of strategic partnerships that will enable us to cost effectively utilize the latest technological innovations required for engaging with mobile platforms.

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