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

By GlobeNewswire,  August 14, 2019, 04:15:00 PM EDT


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 )

Source: Ballantyne Strong, Inc.

This article appears in: News Headlines

Referenced Stocks: BTN










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