Strong Global Entertainment, Inc.
(NYSE American: SGE) (the “Company” or “Strong”) today announced
operating results for the second quarter ended June 30, 2023.
Operational Highlights
- The Company completed its initial
public offering and began trading on the NYSE American in May
2023.
- Revenue and Adjusted EBITDA more
than doubled for the quarter with increased demand from our cinema
customers and our first significant sale of IP at Strong
Studios.
- Added new customer relationships,
including preferred screen partnership with Kinepolis, the
Company’s first major European addition, and an exclusive service
partnership with U.S.-based MJR Theatres.
- Expanded service team to support
increasing demand for laser projection upgrades.
- Strong Studios completed the sale
of a portion of the intellectual property for one of its projects,
resulting in initial revenue of $6.4 million.
Mark Roberson, the Company's Chief Executive
Officer, commented, “This quarter demonstrated significant growth
across our business and the advancement of key strategic
initiatives that should drive long-term value for shareholders. The
spin-out and initial public offering was a huge accomplishment for
the team, and we are excited to now be operating as a separate
public company. Business continued to strengthen as demand for
laser upgrades increased and we continued to expand our market
share. The recent record-breaking box office performances
demonstrate the strength of the premium cinema market and laser
projection and other enhancements to the viewing experience
continue to drive exhibitor demand. We also continue to drive
growth in our non-cinema screen business, and recently secured a
new seven-figure immersive project that we expect to deliver in the
second half of this year.”
Mr. Roberson continued, “Last year we launched
our Strong Studios division to leverage the strength of our cinema
business with the development of original feature films and
television series. During the quarter, Strong Studios generated
revenue of over $6 million, which we view as a noteworthy
validation of our long-term strategy to create and market original
entertainment vehicles. We are encouraged by the division’s
progress and multiple projects in the pipeline.”
Kyle Cerminara, the Company's Chairman of the
Board, commented, “We are very excited to see Strong Global
Entertainment operating as a stand-alone public company. Strong is
an industry leader in the cinema business and has the opportunity
to grow into a much larger entertainment company creating
meaningful value for our shareholders.”
Second Quarter
2023 Financial Review (Compared
to Second Quarter
2022)
- Revenue grew 102% to $17.8 million
compared to $8.8 million in the second quarter of 2022. Revenues
from screen systems and cinema services grew 24% and 42%
respectively, as the demand from our cinema customers continued to
strengthen. The Company has been increasing the scope of our
services and added resources to better support its customers and to
increase market share in cinema services. Revenue from installation
services more than doubling during the quarter and the Strong
Studios division realized $6.4 million in revenue from the sale of
an ownership stake in one of its projects.
- Gross profit increased to $7.2
million, or 40.4% of revenues, compared to $2.1 million, or 23.8%
of revenue in the second quarter of 2022. Gross profit from service
revenue was $5.1 million or 54.1% of revenues for the second
quarter of 2023 compared to $0.3 million or 11.7% of revenues for
the second quarter of 2022. Gross profit percentage increased from
the prior year primarily due to the sale of intellectual property
in one of the Company’s projects, as well as slightly higher
overall gross margin from cinema services. Strong expects margins
on installation services to continue to improve as the Company
continues to onboard and utilize its internal installation
team.
- Income from operations was $0.2
million compared to a loss from operations $0.1 million in the
second quarter of 2022, due to the sale of an ownership stake in
one of Strong Studio’s projects, partially offset non-recurring
transaction-related expenses recognized in the current quarter.
Excluding non-recurring transaction related expenses, income from
operations during the second quarter of 2022 was $1.3 million.
- Net loss was $0.4 million, or $0.06
per basic and diluted share, as compared to breakeven in the prior
year. The increase in net loss was primarily due to the
transaction-related expenses and unfavorable foreign exchange
fluctuations.
- Adjusted EBITDA improved to $3.5
million as compared to $0.1 million in the prior year.
Conference Call
A conference call to discuss the Company’s 2023
second quarter financial results will be held on Thursday, August
10, 2023 at 4:30 pm Eastern Time. Interested parties can listen to
the call via live webcast or by phone. To access the webcast, visit
the Company's website or use the following link: SGE Webcast Link.
To access the conference call by phone, dial (888) 506-0062
(domestic) or (973) 528-0011 (international) and use participant
code 410426. Please access the webcast or dial in at least five
minutes before the start of the call to register.
A replay of the webcast will be available
following the conclusion of the live broadcast and accessible on
the Company’s website.
About Strong Global Entertainment,
Inc.
Strong Global Entertainment, Inc. is a leader in
the entertainment industry, providing mission critical products and
services to cinema exhibitors and entertainment venues for over 90
years. The Company manufactures and distributes premium large
format projection screens, provides comprehensive managed services,
technical support and related products and services primarily to
cinema exhibitors, theme parks, educational institutions, and
similar venues. In addition to traditional projection screens, the
Company manufactures and distributes its Eclipse curvilinear
screens, which are specially designed for theme parks, immersive
exhibitions, as well as simulation applications. It also provides
maintenance, repair, installation, network support services and
other services to cinema operators, primarily in the United States.
The Company also owns Strong Studios, Inc., which develops and
produces original feature films and television series.
About FG Group Holdings Inc.
FG Group Holdings Inc. (NYSE American: FGH) is a
diversified holding company with operations and investments across
a broad range of industries. FG Group Holdings Inc. has a
majority ownership in Strong Global Entertainment, (NYSE American:
SGE), which includes STRONG/MDI Screen Systems (www.strongmdi.com),
the leading premium screen and projection coatings supplier in the
world and Strong Technical Services (www.strong-tech.com), which
provides comprehensive managed service offerings with 24/7/365
support nationwide to ensure solution uptime and availability. FG
Group Holdings Inc. also holds equity stakes in GreenFirst Forest
Products Inc., Firefly Systems, Inc., and FG Financial Group, Inc.,
as well as real estate through its Digital Ignition operating
business.
About Fundamental Global®
Fundamental Global® is a private partnership
focused on long-term strategic holdings. Fundamental Global® was
co-founded by former T. Rowe Price, Point72 and Tiger Cub portfolio
manager Kyle Cerminara and former Chairman and CEO of TD
Ameritrade, Joe Moglia. Its current holdings include FG Financial
Group Inc., FG Group Holdings Inc., BK Technologies Corp.,
GreenFirst Forest Products, Inc., FG Merger Corp., FG Acquisition
Corp., OppFi Inc., Hagerty Inc., and FG Communities, Inc.
The FG® logo is a registered trademark of Fundamental
Global®.
Use of Non-GAAP Measures
Strong Global Entertainment, 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 (“Adjusted
EBITDA”), which differs from the commonly used EBITDA (“EBITDA”).
Adjusted EBITDA both adjusts net income (loss) to exclude income
taxes, interest, and depreciation and amortization, and excludes
share-based compensation, impairment charges, equity method income
(loss), fair value adjustments, severance, foreign currency
transaction gains (losses), transactional gains and expenses, gains
on insurance recoveries, certain tax credits 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 income (loss) or to net cash
from operating activities as measures of operating results or
liquidity. The Company’s 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.
EBITDA and Adjusted EBITDA have limitations as
analytical tools, and you should not consider them in isolation, or
as substitutes for analysis of the Company’s results as reported
under GAAP. Some of these limitations are: (i) they do not reflect
the Company’s cash expenditures, or future requirements for capital
expenditures or contractual commitments, (ii) they do not reflect
changes in, or cash requirements for, the Company’s 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 the Company’s 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 the
Company’s statements of cash flows, (vi) they do not reflect the
impact of earnings or charges resulting from matters management
considers not to be indicative of the Company’s ongoing operations,
and (vii) other companies in the Company’s industry may calculate
these measures differently than the Company does, limiting their
usefulness as comparative measures.
Management believes 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). The
Company also presents EBITDA and Adjusted EBITDA because (i)
management believes these measures are frequently used by
securities analysts, investors and other interested parties to
evaluate companies in the Company’s industry, (ii) management
believes investors will find these measures useful in assessing the
Company’s ability to service or incur indebtedness, and (iii)
management uses EBITDA and Adjusted EBITDA internally as benchmarks
to evaluate the Company’s operating performance or compare the
Company’s performance to that of its competitors.
Forward-Looking Statements
In addition to the historical information
included herein, this press release contains “forward-looking
statements” that are subject to substantial risks and
uncertainties. All statements, other than statements of historical
fact, contained in this press release are forward-looking
statements. Forward-looking statements contained in this press
release may be identified by the use of words such as “anticipate,”
“believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,”
“seek,” “may,” “might,” “plan,” “potential,” “predict,” “project,”
“target,” “aim,” “should,” “will” “would,” or the negative of these
words or other similar expressions, although not all
forward-looking statements contain these words. Forward-looking
statements are based on the Company’s current expectations and are
subject to inherent uncertainties, risks and assumptions that are
difficult to predict. Further, certain forward-looking statements
are based on assumptions as to future events that may not prove to
be accurate. These and other risks and uncertainties are described
more fully in the section titled “Risk Factors” in the final
prospectus related to the public offering filed with the SEC.
Forward-looking statements contained in this announcement are made
as of this date, and the Company undertakes no duty to update such
information except as required under applicable law.
Investor Relations
Contacts:
Mark RobersonStrong Global Entertainment, Inc. -
Chief Executive Officer(704)
471-6784IR@strong-entertainment.com
John Nesbett/Jennifer BelodeauIMS Investor
Relations(203) 972-9200sge@imsinvestorrelations.com
Strong Global Entertainment,
Inc. and
SubsidiariesCondensed Consolidated Balance
Sheets(In
thousands)(Unaudited)
|
June 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
4,371 |
|
|
$ |
3,615 |
|
Accounts receivable, net |
|
6,377 |
|
|
|
6,148 |
|
Inventories, net |
|
3,125 |
|
|
|
3,389 |
|
Other current assets |
|
11,813 |
|
|
|
4,547 |
|
Total current assets |
|
25,686 |
|
|
|
17,699 |
|
Property, plant and equipment, net |
|
1,655 |
|
|
|
4,607 |
|
Operating lease right-of-use assets |
|
4,761 |
|
|
|
237 |
|
Finance lease right-of-use asset |
|
853 |
|
|
|
606 |
|
Film and television programming rights, net |
|
7,691 |
|
|
|
1,501 |
|
Intangible assets, net |
|
2 |
|
|
|
6 |
|
Goodwill |
|
902 |
|
|
|
882 |
|
Total assets |
$ |
41,550 |
|
|
$ |
25,538 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,232 |
|
|
$ |
4,106 |
|
Accrued expenses |
|
7,327 |
|
|
|
4,486 |
|
Payable to FG Group Holdings Inc. |
|
2,264 |
|
|
|
1,861 |
|
Short-term debt |
|
12,219 |
|
|
|
2,510 |
|
Current portion of long-term debt |
|
37 |
|
|
|
36 |
|
Current portion of operating lease obligations |
|
326 |
|
|
|
64 |
|
Current portion of finance lease obligations |
|
166 |
|
|
|
105 |
|
Deferred revenue and customer deposits |
|
1,140 |
|
|
|
1,769 |
|
Total current liabilities |
|
26,711 |
|
|
|
14,937 |
|
Operating lease obligations, net of current portion |
|
4,545 |
|
|
|
234 |
|
Finance lease obligations, net of current portion |
|
690 |
|
|
|
502 |
|
Long-term debt, net of current portion |
|
107 |
|
|
|
126 |
|
Deferred income taxes |
|
- |
|
|
|
529 |
|
Other long-term liabilities |
|
625 |
|
|
|
6 |
|
Total liabilities |
|
32,678 |
|
|
|
16,334 |
|
|
|
|
|
Equity: |
|
|
|
Common stock |
|
- |
|
|
|
- |
|
Additional paid-in-capital |
|
14,989 |
|
|
|
- |
|
Accumulated deficit |
|
(841 |
) |
|
|
- |
|
Accumulated other comprehensive loss |
|
(5,276 |
) |
|
|
(5,024 |
) |
Net parent investment |
|
- |
|
|
|
14,228 |
|
Total equity |
|
8,872 |
|
|
|
9,204 |
|
Total liabilities and equity |
$ |
41,550 |
|
|
$ |
25,538 |
|
|
|
|
|
Strong Global
Entertainment, Inc.
and SubsidiariesCondensed Consolidated
Statements of Operations(In thousands, except per
share data)(Unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net product sales |
|
$ |
8,411 |
|
|
$ |
6,683 |
|
|
$ |
15,615 |
|
|
$ |
14,386 |
|
Net service revenues |
|
|
9,428 |
|
|
|
2,140 |
|
|
|
12,175 |
|
|
|
4,157 |
|
Total net revenues |
|
|
17,839 |
|
|
|
8,823 |
|
|
|
27,790 |
|
|
|
18,543 |
|
Total cost of products |
|
|
6,305 |
|
|
|
4,834 |
|
|
|
11,770 |
|
|
|
10,692 |
|
Total cost of services |
|
|
4,325 |
|
|
|
1,890 |
|
|
|
6,490 |
|
|
|
3,547 |
|
Total cost of revenues |
|
|
10,630 |
|
|
|
6,724 |
|
|
|
18,260 |
|
|
|
14,239 |
|
Gross profit |
|
|
7,209 |
|
|
|
2,099 |
|
|
|
9,530 |
|
|
|
4,304 |
|
Selling and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
618 |
|
|
|
684 |
|
|
|
1,151 |
|
|
|
1,225 |
|
Administrative |
|
|
6,414 |
|
|
|
1,475 |
|
|
|
7,845 |
|
|
|
2,770 |
|
Total selling and administrative expenses |
|
|
7,032 |
|
|
|
2,159 |
|
|
|
8,996 |
|
|
|
3,995 |
|
Gain on disposal of assets |
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
Income (loss) from operations |
|
|
177 |
|
|
|
(60 |
) |
|
|
535 |
|
|
|
309 |
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(62 |
) |
|
|
(27 |
) |
|
|
(118 |
) |
|
|
(51 |
) |
Foreign currency transaction (loss) gain |
|
|
(426 |
) |
|
|
206 |
|
|
|
(309 |
) |
|
|
128 |
|
Other income, net |
|
|
(15 |
) |
|
|
3 |
|
|
|
(4 |
) |
|
|
4 |
|
Total other (expense) income |
|
|
(503 |
) |
|
|
182 |
|
|
|
(431 |
) |
|
|
81 |
|
(Loss) income before income taxes |
|
|
(326 |
) |
|
|
122 |
|
|
|
104 |
|
|
|
390 |
|
Income tax expense |
|
|
(90 |
) |
|
|
(109 |
) |
|
|
(144 |
) |
|
|
(184 |
) |
Net (loss) income |
|
$ |
(416 |
) |
|
$ |
13 |
|
|
$ |
(40 |
) |
|
$ |
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.06 |
) |
|
$ |
0.00 |
|
|
$ |
(0.01 |
) |
|
$ |
0.03 |
|
Diluted |
|
$ |
(0.06 |
) |
|
$ |
0.00 |
|
|
$ |
(0.01 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
6,553 |
|
|
|
6,000 |
|
|
|
6,278 |
|
|
|
6,000 |
|
Diluted |
|
|
6,553 |
|
|
|
6,000 |
|
|
|
6,278 |
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong Global
Entertainment, Inc.
and SubsidiariesCondensed Consolidated
Statements of Cash Flows(In
thousands)(Unaudited)
|
Six Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities: |
|
|
|
Net (loss) income |
$ |
(40 |
) |
|
$ |
206 |
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
(Recovery of) provision for doubtful accounts |
|
(3 |
) |
|
|
3 |
|
Provision for obsolete inventory |
|
29 |
|
|
|
6 |
|
Provision for warranty |
|
73 |
|
|
|
15 |
|
Depreciation and amortization |
|
2,309 |
|
|
|
367 |
|
Amortization and accretion of operating leases |
|
32 |
|
|
|
36 |
|
Deferred income taxes |
|
(763 |
) |
|
|
(48 |
) |
Stock-based compensation expense |
|
766 |
|
|
|
72 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(213 |
) |
|
|
(1,100 |
) |
Inventories |
|
286 |
|
|
|
(602 |
) |
Current income taxes |
|
38 |
|
|
|
417 |
|
Other assets |
|
(8,542 |
) |
|
|
1,330 |
|
Accounts payable and accrued expenses |
|
6,116 |
|
|
|
(2,622 |
) |
Deferred revenue and customer deposits |
|
(636 |
) |
|
|
(71 |
) |
Operating lease obligations |
|
(38 |
) |
|
|
(31 |
) |
Net cash used in operating activities |
|
(586 |
) |
|
|
(2,022 |
) |
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
|
(316 |
) |
|
|
(179 |
) |
Acquisition of programming rights |
|
(86 |
) |
|
|
(337 |
) |
Net cash used in investing activities |
|
(402 |
) |
|
|
(516 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Principal payments on short-term debt |
|
(282 |
) |
|
|
(156 |
) |
Principal payments on long-term debt |
|
(18 |
) |
|
|
(11 |
) |
Borrowings under credit facility |
|
4,344 |
|
|
|
- |
|
Repayments under credit facility |
|
(2,132 |
) |
|
|
- |
|
Payments on finance lease obligations |
|
(60 |
) |
|
|
- |
|
Proceeds from initial public offering |
|
2,411 |
|
|
|
- |
|
Payments of withholding taxes for net share settlement of equity
awards |
|
(104 |
) |
|
|
- |
|
Net cash transferred (to) from parent |
|
(2,283 |
) |
|
|
1,065 |
|
Net cash provided by (used in) financing activities |
|
1,876 |
|
|
|
898 |
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(132 |
) |
|
|
112 |
|
Net increase (decrease) in
cash and cash equivalents |
|
756 |
|
|
|
(1,528 |
) |
Cash and cash equivalents at
beginning of period |
|
3,615 |
|
|
|
4,494 |
|
Cash and cash equivalents at
end of period |
$ |
4,371 |
|
|
$ |
2,966 |
|
|
|
|
|
Strong Global Entertainment,
Inc. and
SubsidiariesReconciliation of Net Income (Loss) to
Adjusted EBITDA(In
thousands)(Unaudited)
|
Quarters Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(416 |
) |
|
$ |
13 |
|
|
$ |
(40 |
) |
|
$ |
206 |
|
Interest expense, net |
|
62 |
|
|
|
27 |
|
|
|
118 |
|
|
|
51 |
|
Income tax expense |
|
90 |
|
|
|
109 |
|
|
|
144 |
|
|
|
184 |
|
Depreciation and amortization |
|
2,130 |
|
|
|
154 |
|
|
|
2,309 |
|
|
|
367 |
|
EBITDA |
|
1,866 |
|
|
|
303 |
|
|
|
2,531 |
|
|
|
808 |
|
Stock-based compensation expense |
|
748 |
|
|
|
33 |
|
|
|
766 |
|
|
|
72 |
|
IPO related expenses |
|
475 |
|
|
|
- |
|
|
|
475 |
|
|
|
- |
|
Foreign currency transaction loss (gain) |
|
426 |
|
|
|
(206 |
) |
|
|
309 |
|
|
|
(128 |
) |
Adjusted EBITDA |
$ |
3,515 |
|
|
$ |
130 |
|
|
$ |
4,081 |
|
|
$ |
752 |
|
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