Strong Global Entertainment, Inc. (NYSE American:
SGE) (the “Company” or “Strong Global Entertainment”) today
announced operating results for the third quarter ended September
30, 2023.
Operational Highlights - Quarter and
Year-to-Date
- Industry upgrades continue to drive
consolidated revenue growth:
- Third quarter revenue grew 10% and
year to date total revenue increased 36% as compared to the same
periods of the prior year.
- Third quarter service revenues
increased 32% and year to date service revenues more than doubled
as compared to the same periods of the prior year.
- The Company expanded its immersive
product offerings in the third quarter with the announcement of a
new Seismos flooring product line and securing first commercial
installation.
- Announced agreement to produce new
crime drama series, Endangered, in South Africa.
- Completed first two acquisitions
following initial public offering (the “IPO”):
- Unbounded Media Corporation
(“Unbounded”), completed in third quarter, which adds production
service capabilities to Strong Studios group; and
- Innovative Cinema Solutions
(“ICS”), completed subsequent to close of third quarter, adding
scale to Strong Technical Services group.
Mark Roberson, Chief Executive Officer,
commented, “We continued to execute on our strategic growth
initiatives, growing organically while also adding scale with the
first two acquisitions following our IPO. Our business continues to
strengthen as demand for our products and services increases, and
the recent box office success of several summer releases, coupled
with more and more people returning to theaters, is a demonstration
of the demand for laser projection and additional enhancements that
optimize the viewing experience.”
Mr. Roberson continued, “We closed two
acquisitions over the past two months, adding Unbounded in
September and ICS just this week. These acquisitions are initial
steps in a broader growth strategy. We are excited to have both
groups join the team as we continue to expand Strong Global
Entertainment.”
Kyle Cerminara, Chairman of the Board,
commented, “We are very excited to see Strong Global Entertainment
implementing its growth plans. We believe that we have a strategy
in place and a long-term view of the business that will drive
meaningful growth and value for our shareholders.”
Third Quarter 2023 Financial Review
(Compared to Third Quarter 2022)
- Revenue grew 10.3% to $10.9 million
compared to $9.9 million in the third quarter of 2022, as demand
from the Company’s cinema customers continued to strengthen. In
addition, Strong Global Entertainment recognized revenue from its
first Seismos flooring product line during the quarter. The Company
has been increasing the scope of its services and adding resources
to better support its customers and to increase market share in
cinema services. Revenue from installation services increased 68%
for the quarter and screen sales increased 16%.
- Gross profit increased to $2.8
million, or 25.8% of revenues, compared to $2.4 million, or 23.9%
of revenue in the third quarter of 2022. Gross profit from service
revenue increased to 21.8% of revenue for the third quarter of 2023
compared to 10.0% of revenues for the third quarter of 2022.
- Income from operations was $0.2
million compared to $0.5 million in the third quarter of 2022, as
increased gross profit was offset by increased selling, general and
administrative expenses, including costs of operating as a
stand-alone public company.
- Net income was breakeven, as
compared to $0.7 million or $0.13 per basic and diluted share in
the prior year. The reduction in net income was primarily due to
increased selling, general and administrative costs offsetting
improved gross margins.
- Adjusted Earnings Before Interest,
Taxes, Depreciation, and Amortization (“EBITDA”) decreased to $0.5
million as compared to $0.7 million in the prior year, primarily as
a result of increased selling, general and administrative expenses
in the quarter as the Company continues to execute on its
acquisition strategy.
Conference Call
A conference call to discuss the Company’s 2023
third quarter financial results will be held on Thursday, November
9, 2023, at 4:30 p.m. 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 (877) 545-0320 (domestic) or (973) 528-0002
(international) and use participant code 375936. 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., (the “Company”) a
subsidiary of FG Group Holdings Inc. (NYSE American:
FGH), 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 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., iCoreConnect, Inc., 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, severance, foreign
currency transaction gains (losses), transactional gains and
expenses, gains on insurance recoveries, 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)
|
September 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,110 |
|
|
$ |
3,615 |
|
Accounts receivable, net |
|
7,443 |
|
|
|
6,148 |
|
Inventories, net |
|
3,597 |
|
|
|
3,389 |
|
Other current assets |
|
1,337 |
|
|
|
4,547 |
|
Total current assets |
|
15,487 |
|
|
|
17,699 |
|
Property, plant and equipment, net |
|
1,522 |
|
|
|
4,607 |
|
Operating lease right-of-use assets |
|
4,695 |
|
|
|
237 |
|
Finance lease right-of-use asset |
|
1,004 |
|
|
|
606 |
|
Film and television programming rights, net |
|
8,205 |
|
|
|
1,501 |
|
Intangible assets, net |
|
- |
|
|
|
6 |
|
Goodwill |
|
2,049 |
|
|
|
882 |
|
Total assets |
$ |
32,962 |
|
|
$ |
25,538 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,576 |
|
|
$ |
4,106 |
|
Accrued expenses |
|
7,326 |
|
|
|
4,486 |
|
Payable to FG Group Holdings Inc. |
|
1,818 |
|
|
|
1,861 |
|
Short-term debt |
|
2,777 |
|
|
|
2,510 |
|
Current portion of long-term debt |
|
37 |
|
|
|
36 |
|
Current portion of operating lease obligations |
|
278 |
|
|
|
64 |
|
Current portion of finance lease obligations |
|
203 |
|
|
|
105 |
|
Deferred revenue and customer deposits |
|
1,515 |
|
|
|
1,769 |
|
Total current liabilities |
|
17,530 |
|
|
|
14,937 |
|
Operating lease obligations, net of current portion |
|
4,478 |
|
|
|
234 |
|
Finance lease obligations, net of current portion |
|
814 |
|
|
|
502 |
|
Long-term debt, net of current portion |
|
169 |
|
|
|
126 |
|
Deferred income taxes |
|
120 |
|
|
|
529 |
|
Other long-term liabilities |
|
525 |
|
|
|
6 |
|
Total liabilities |
|
23,636 |
|
|
|
16,334 |
|
|
|
|
|
Equity: |
|
|
|
Common stock, no par value |
|
- |
|
|
|
- |
|
Additional paid-in-capital |
|
15,589 |
|
|
|
- |
|
Accumulated deficit |
|
(807 |
) |
|
|
- |
|
Accumulated other comprehensive loss |
|
(5,456 |
) |
|
|
(5,024 |
) |
Net parent investment |
|
- |
|
|
|
14,228 |
|
Total equity |
|
9,326 |
|
|
|
9,204 |
|
Total liabilities and equity |
$ |
32,962 |
|
|
$ |
25,538 |
|
Strong Global Entertainment, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations(In thousands, except per share
data)(Unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net product sales |
$ |
7,994 |
|
|
$ |
7,690 |
|
|
$ |
23,609 |
|
|
$ |
22,076 |
|
Net service revenues |
|
2,926 |
|
|
|
2,213 |
|
|
|
15,100 |
|
|
|
6,370 |
|
Total net revenues |
|
10,920 |
|
|
|
9,903 |
|
|
|
38,709 |
|
|
|
28,446 |
|
Total cost of products |
|
5,809 |
|
|
|
5,541 |
|
|
|
17,579 |
|
|
|
16,233 |
|
Total cost of services |
|
2,289 |
|
|
|
1,991 |
|
|
|
8,779 |
|
|
|
5,538 |
|
Total cost of revenues |
|
8,098 |
|
|
|
7,532 |
|
|
|
26,358 |
|
|
|
21,771 |
|
Gross profit |
|
2,822 |
|
|
|
2,371 |
|
|
|
12,351 |
|
|
|
6,675 |
|
Selling and administrative expenses: |
|
|
|
|
|
|
|
Selling |
|
500 |
|
|
|
498 |
|
|
|
1,652 |
|
|
|
1,723 |
|
Administrative |
|
2,139 |
|
|
|
1,368 |
|
|
|
9,983 |
|
|
|
4,138 |
|
Total selling and administrative expenses |
|
2,639 |
|
|
|
1,866 |
|
|
|
11,635 |
|
|
|
5,861 |
|
Gain on disposal of assets |
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
Income from operations |
|
183 |
|
|
|
505 |
|
|
|
717 |
|
|
|
814 |
|
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense, net |
|
(88 |
) |
|
|
(31 |
) |
|
|
(206 |
) |
|
|
(82 |
) |
Foreign currency transaction gain (loss) |
|
126 |
|
|
|
518 |
|
|
|
(183 |
) |
|
|
646 |
|
Other income, net |
|
18 |
|
|
|
11 |
|
|
|
16 |
|
|
|
15 |
|
Total other income (expense) |
|
56 |
|
|
|
498 |
|
|
|
(373 |
) |
|
|
579 |
|
Income before income taxes |
|
239 |
|
|
|
1,003 |
|
|
|
344 |
|
|
|
1,393 |
|
Income tax expense |
|
(205 |
) |
|
|
(233 |
) |
|
|
(349 |
) |
|
|
(417 |
) |
Net income (loss) |
$ |
34 |
|
|
$ |
770 |
|
|
$ |
(5 |
) |
|
$ |
976 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.00 |
|
|
$ |
0.13 |
|
|
$ |
0.00 |
|
|
$ |
0.16 |
|
Diluted |
$ |
0.00 |
|
|
$ |
0.13 |
|
|
$ |
0.00 |
|
|
$ |
0.16 |
|
Strong Global Entertainment, Inc. and
SubsidiariesCondensed Consolidated Statements of
Cash Flows(In
thousands)(Unaudited)
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities: |
|
|
|
Net (loss) income |
$ |
(5 |
) |
|
$ |
976 |
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
(Recovery of) provision for doubtful accounts |
|
(32 |
) |
|
|
10 |
|
Benefit from obsolete inventory |
|
(47 |
) |
|
|
- |
|
Provision for warranty |
|
131 |
|
|
|
9 |
|
Depreciation and amortization |
|
2,438 |
|
|
|
521 |
|
Amortization and accretion of operating leases |
|
48 |
|
|
|
52 |
|
Deferred income taxes |
|
(430 |
) |
|
|
(116 |
) |
Stock-based compensation expense |
|
890 |
|
|
|
97 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(1,223 |
) |
|
|
(395 |
) |
Inventories |
|
(158 |
) |
|
|
(556 |
) |
Current income taxes |
|
154 |
|
|
|
503 |
|
Other assets |
|
(7,864 |
) |
|
|
1,133 |
|
Accounts payable and accrued expenses |
|
5,549 |
|
|
|
(3,572 |
) |
Deferred revenue and customer deposits |
|
(257 |
) |
|
|
(420 |
) |
Operating lease obligations |
|
(57 |
) |
|
|
(50 |
) |
Net cash used in operating activities |
|
(863 |
) |
|
|
(1,808 |
) |
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
|
(288 |
) |
|
|
(197 |
) |
Acquisition of programming rights |
|
(511 |
) |
|
|
(407 |
) |
Net cash used in investing activities |
|
(799 |
) |
|
|
(604 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Principal payments on short-term debt |
|
(358 |
) |
|
|
(228 |
) |
Principal payments on long-term debt |
|
(27 |
) |
|
|
(20 |
) |
Borrowings under credit facility |
|
6,790 |
|
|
|
- |
|
Repayments under credit facility |
|
(4,483 |
) |
|
|
- |
|
Payments on finance lease obligations |
|
(99 |
) |
|
|
- |
|
Proceeds from initial public offering |
|
2,411 |
|
|
|
- |
|
Payments of withholding taxes for net share settlement of equity
awards |
|
(117 |
) |
|
|
- |
|
Net cash transferred (to) from parent |
|
(3,001 |
) |
|
|
1,285 |
|
Net cash provided by financing activities |
|
1,116 |
|
|
|
1,037 |
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
41 |
|
|
|
70 |
|
Net decrease in cash and cash
equivalents and restricted cash |
|
(505 |
) |
|
|
(1,305 |
) |
Cash and cash equivalents and
restricted cash at beginning of period |
|
3,615 |
|
|
|
4,494 |
|
Cash and cash equivalents and
restricted cash at end of period |
$ |
3,110 |
|
|
$ |
3,189 |
|
Strong Global Entertainment, Inc. and
SubsidiariesReconciliation of Net Income (Loss) to
Adjusted EBITDA(In
thousands)(Unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
34 |
|
|
$ |
770 |
|
|
$ |
(5 |
) |
|
$ |
976 |
|
Interest expense, net |
|
88 |
|
|
|
31 |
|
|
|
206 |
|
|
|
82 |
|
Income tax expense |
|
205 |
|
|
|
233 |
|
|
|
349 |
|
|
|
417 |
|
Depreciation and amortization |
|
129 |
|
|
|
154 |
|
|
|
2,438 |
|
|
|
521 |
|
EBITDA |
|
456 |
|
|
|
1,188 |
|
|
|
2,988 |
|
|
|
1,996 |
|
Stock-based compensation expense |
|
124 |
|
|
|
25 |
|
|
|
890 |
|
|
|
97 |
|
IPO related expenses |
|
- |
|
|
|
- |
|
|
|
475 |
|
|
|
- |
|
Unbounded acquisition related expenses |
|
42 |
|
|
|
- |
|
|
|
42 |
|
|
|
- |
|
Foreign currency transaction (gain) loss |
|
(126 |
) |
|
|
(518 |
) |
|
|
183 |
|
|
|
(646 |
) |
Severance and other |
|
7 |
|
|
|
- |
|
|
|
7 |
|
|
|
- |
|
Adjusted EBITDA |
$ |
503 |
|
|
$ |
695 |
|
|
$ |
4,585 |
|
|
$ |
1,447 |
|
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